LONDON/SYDNEY – Oil prices surged, the dollar jumped and shares slid on Monday as military conflict in the Middle East looked set to last for weeks, threatening to upend a global economic recovery and perhaps reignite inflation.
Brent jumped around 10% to $79.90 a barrel, though it had briefly topped $82.00 at one stage, while US crude climbed 8.2% to $72.64 per barrel. Safe-haven gold rose 2.6% to $5,413 an ounce .
Israel launched new air strikes targeting Tehran and expanded its military campaign to include attacks on Iran-backed Hizbollah militants in Lebanon on Monday, as US President Donald Trump signalled the US-Israeli military assault on Iranian targets could continue for weeks.
Meanwhile, Iran’s state media said a new wave of missiles was being launched from central parts of Iran towards “enemy locations”.
All eyes were on the Strait of Hormuz, through which around a fifth of the world’s seaborne oil trade flows and 20% of its liquefied natural gas. While the vital waterway has not yet 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.
“At least in the short term, the disruption to global energy supply is substantial, (and) this clearly adds upside risks to the oil price,” said Michael Langham, emerging markets economist at Aberdeen Investments.
He added, however, that “a global oil price shock is not the intention of the Trump administration ahead of US mid-term elections in November”.
A prolonged spike in oil prices would risk reigniting inflationary pressures globally, while also acting as a tax on business and consumers that could dampen demand.
OPEC+ did agree a modest oil output boost of 206,000 barrels per day for April on Sunday, but a lot of that product still has to get out of the Middle East by tanker.
