Oil prices rose and stock markets came under pressure on Monday after intense US-Israeli strikes on Iran prompted fears of significant global economic disruption.
Brent crude jumped by as much as 13% during early trading – to hit $82 a barrel, a 14-month high – as the effective closure of the strait of Hormuz, one of the most important arteries for global trade, intensified concerns over oil supplies.
While oil later fell back slightly from its initial highs, Brent remained up by 6% at nearly $78 a barrel.
Markets fell in Europe, with London’s FTSE 100 down 1% to 10,798 points. IAG, the parent company of British Airways, and easyJet were among the worst performers, as thousands of flights were cancelled, down 5% and3%, respectively.
However, the surge in the crude price pushed up shares in the oil companies BP and Shell, up about 5% and 3% respectively. Shares in the weapons manufacturer BAE Systems jumped by 4.5% as investors piled into defence stocks.
Other European stock markets fell on Monday, with the German Dax index down by 1.6%, the French CAC 40 down 1.5%, the Italian FTSE MIB down 1.8% and the Spanish Ibex down 2.4%.
European gas prices rose as much as 28%, the biggest increase since August 2023, on Monday morning. Power prices in Europe also rose on the higher gas and oil prices. The German year-ahead baseload contract rose 3.6% to €82.50 a megawatt-hour, while the equivalent French price rose by 1.2% to €51.00/MWh.
QatarEnergy said on Monday it had halted production of liquefied natural gas after attacks on facilities in Ras Laffan and Mesaieed.
In Tokyo, the Nikkei 225 fell by nearly 2.4% as traders in Asia responded to the weekend’s developments. It later pulled back, to trade down 1.4%. Pre-market trading also put Wall Street on course to open lower on Monday.
In Sydney, the ASX 200 opened down sharply, before recovering, to finish the day flat. China’s Shenzhen Composite fell 0.7%.
Gold, often deemed a safe-haven asset by investors during times of crisis, rose 2.5% to $5,408 an ounce.
Military strikes by the US and Israel on Iran showed no sign of lessening, with Donald Trump suggesting the conflict could last for four more weeks and saying that attacks would continue until US objectives were met.
As prices rallied, all eyes were on the strait of Hormuz – with about a fifth of oil supplies and seaborne gas tankers passing through it.
Within hours of Saturday’s US-Israeli strikes, Tehran had reportedly warned tankers in the strait that no ship would be allowed to pass through.
Two ships have been attacked in the strait, one off Oman and the other off the UAE, according to United Kingdom Maritime Trade Operations (UKMTO), the British maritime security agency.
While Iran has yet to officially confirm that the vital waterway has been blocked, marine tracking sites showed tankers piling up on either side of the strait wary of attack or maybe unable to get insurance for the voyage.
The International Maritime Organization urged ships to avoid the strait of Hormuz. Arsenio Dominguez, its secretary general, expressed deep concern over reports that several seafarers had been wounded in attacks.
“I urge all shipping companies to exercise maximum caution,” said Dominguez. “Where possible, vessels should avoid transiting the affected region until conditions improve.”
Maersk, the shipping multinational, announced on Sunday it was halting passage through the strait of Hormuz and the Suez canal, another vital artery of the world economy, citing safety reasons.
Some analysts suggested oil prices could exceed $100 a barrel unless flows through the strait of Hormuz were quickly restored.
The Opec+ cartel of producing nations agreed on Sunday a modest oil output boost of 206,000 barrels a day for April, but a lot of that product still has to get out of the Middle East by tanker.
Iran is one of the cartel’s largest producers, pumping 4.5% of global supplies, so any disruption to its own shipments is likely to have an impact on the wider market.
“The disruption creates a dual supply shock: not only are current exports through the strait halted, but Opec+ additional volumes and ultimately most of Opec’s spare capacity – typically a key lever for balancing the global oil market – are inaccessible while the waterway remains closed,” analysts at the energy consultancy Wood Mackenzie said in a note.
In the UK, forecourt prices have already been rising in recent weeks but could climb further because of the conflict, according to the RAC.
The RAC’s Simon Williams said: “Regardless of the current situation, petrol rose by a penny a litre in February and is likely to go up by another penny in the next week or so to an average of 134p a litre.
“If oil were to climb to and stay at the $80 a barrel mark, then drivers could expect to pay an average of 136p for petrol. At $90, we’d be looking at over 140p a litre and $100 would take us nearer to 150p, but it’s all too soon to know.”
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: theguardian.com
