Global oil markets have climbed as Iran continues retaliatory strikes across the Middle East in response to ongoing U.S. and Israeli attacks.
Brent crude, the international benchmark, surged 10% to over $82 per barrel on Monday after at least three vessels were struck near the Strait of Hormuz over the weekend. Natural gas prices also jumped as much as 25%.
Tehran issued warnings to ships to avoid the vital waterway in southern Iran, a passage responsible for transporting about one-fifth of the world’s oil and gas.
In London, the FTSE 100 index dropped 1%, with airline companies, including British Airways, among the largest decliners due to disruptions in Middle East airspace.
Major banks such as Barclays, Standard Chartered, and HSBC also saw their stock values decrease amid concerns that higher energy prices could fuel inflation and limit central banks’ ability to cut interest rates.
European stock markets experienced sharper declines, with France’s CAC-40 down 1.8% and Germany’s DAX falling 2.1% in early afternoon trading.
Gold, considered a safe-haven investment, gained 2%, rising to $5,388 an ounce as investors sought protection amid the uncertainty.
Shipping near the Strait of Hormuz has nearly come to a halt, prompting analysts to warn that prolonged disruption could further elevate energy prices.
The UK Maritime Trade Operations Centre reported that two vessels had been hit, while an “unknown projectile” exploded near a third ship.
Following the initial spike, Brent crude retreated slightly to $79 per barrel, while U.S. oil rose roughly 7.6% to $72.20 per barrel.
Saul Kavonic, head of energy research at MST Marquee, told the BBC that “the market isn’t panicking,” noting that so far, oil transport and production infrastructure has largely avoided direct targeting.
Traders will monitor when shipping resumes through the Strait of Hormuz, which could help stabilize oil prices once again.
Some analysts warn that prolonged conflict could push crude prices above $100 per barrel, potentially intensifying inflation and influencing interest rate decisions.
Robin Mills, CEO of Dubai-based Qamar Energy and former Shell executive, said that the recent price surge would immediately impact markets, though current levels remain below those seen two years ago, keeping the situation short of a full-scale oil crisis.
OPEC+ agreed on Sunday to raise output by 206,000 barrels per day to offset potential price hikes, although experts caution the effect may be limited.
Edmund King, president of the AA, noted that disruptions across the Middle East would almost certainly increase global petrol prices, with the extent of price hikes depending on the conflict’s duration.
Subitha Subramaniam, chief economist at Sarasin & Partners, warned that sustained high oil prices could trigger broader inflation, affecting food, industrial commodities, and agriculture.
Although UK inflation has been easing, Subramaniam suggested that the Bank of England might maintain interest rates at 3.75% despite previous indications of potential cuts.
The Islamic Revolutionary Guards Corps reported on Sunday that three tankers from the UK and the U.S. had been hit and were ablaze, though both governments have not confirmed the incidents.
The UKMTO indicated multiple security events across the Arabian Gulf and Gulf of Oman, advising vessels to navigate cautiously.
About 150 tankers have anchored outside the Strait of Hormuz, with only a few Iranian and Chinese ships passing through, according to the tracking platform Kpler.
Homayoun Falakshahi from Kpler stated that the strait is effectively closed due to Iran’s threats, with shipping companies avoiding transit over heightened risk and insurance costs.
The U.S. may attempt to secure shipping lanes, which could prevent further oil spikes, but prolonged closures could send prices significantly higher.
Maersk, the Danish container shipping group, announced on Sunday that it would suspend sailings through the Bab el-Mandeb Strait and the Suez Canal, rerouting vessels around the Cape of Good Hope.