Oil prices surge as Middle East war escalates as global stocks fall on weak US jobs data
NEW YORJK, March 7 — Crude prices surged yesterday on mounting fears about oil supply disruption amid the Middle East war, while equities retreated on poor US hiring data.
The US-Israel war on Iran and Tehran’s retaliatory attacks across the Gulf region have upended the world’s energy and transport sectors, virtually halting activity in the Strait of Hormuz.
The international benchmark oil contract, Brent North Sea crude, surged to US$92.69 (RM365) per barrel, up 8.5 per cent for the day and nearly 30 per cent for the week after US President Donald Trump said only the “unconditional surrender” of Iran would end the Middle East war.
The main US contract West Texas Intermediate soared more than 12 per cent to over US$90 per barrel.
Maritime traffic has all but dried up through the Strait of Hormuz, through which a fifth of the world’s crude oil and liquefied natural gas supplies run.
Market reaction to the conflict had been tempered by hopes that it would be short, but Trump’s demand for Iran’s capitulation increases the prospect of a long conflict.
Trump’s comments “dashed hopes that the conflict will be averted quickly, and the oil price has continued its push” higher, said XTB research director Kathleen Brooks.
The prospect of high energy prices for a sustained period has fanned fears of a fresh spike in inflation that could hit the global economy while curbing the ability of central banks to cut interest rates to prop up growth.
“The longer that key energy infrastructure and shipping routes in the region are affected, the greater the chance of a significant inflationary impact,” said AJ Bell investment director Russ Mould.
Attacks on oilfields were reported in southern Iraq and in the northern autonomous Kurdistan region, which forced a US-run oil field to shut production. Kuwait has also begun cutting production due to a lack of petroleum storage capacity, the Wall Street Journal reported.
Earlier this week, Trump pledged to protect ships through the Strait of Hormuz, but shipping companies have exercised caution in the region.
Trump’s pledge helped “reduce some of the risk premium in oil markets,” but will have “limited impact unless Iran’s extensive disruption capabilities are first neutralised,” said a note from analysts at JPMorgan Chase.
Meanwhile, data showed the US economy had unexpectedly lost jobs in February, while unemployment also edged up.
The world’s biggest economy shed 92,000 jobs last month, down from revised job growth of 126,000 in January, said the Labor Department.
New data released yesterday also showed US retail sales had fallen by 0.2 per cent in January.
Investors often look at data showing a slowdown in the economy as raising the chances of the US Federal Reserve lowering interest rates. But analysts have said higher oil prices complicate that picture.
Until recently, the markets were anticipating the Fed would resume interest rate cuts in June, but that has now shifted to September.
Wall Street’s main indices finished down around one per cent or more.
Europe’s main markets, which had earlier shown only small losses, finished the day with losses of around one per cent.
An exception to yesterday’s selloff was Boeing, which piled on 4.1 per cent following a Bloomberg report that said the company was close to a big sales agreement with Chinese carriers.
Key figures at around 2115 GMT
Brent North Sea Crude: UP 8.5 per cent at US$92.69 per barrel
West Texas Intermediate: UP 12.2 per cent at US$90.90 per barrel
New York — Dow: DOWN 1.3 per cent at 47,501.55 (close)
New York — S&P 500: DOWN 1.3 per cent at 6,740.02 (close)
New York — Nasdaq Composite: DOWN 1.6 per cent at 22,387.68 (close)
London — FTSE 100: DOWN 1.2 per cent at 10,284.75 (close)
Paris — CAC 40: DOWN 0.7 per cent at 7,993.49 (close)
Frankfurt — DAX: DOWN 0.9 per cent at 23,591.03 (close)
Seoul — Kospi: FLAT at 5,584.87 (close)
Tokyo — Nikkei 225: UP 0.6 per cent at 55,620.84 (close)
Hong Kong — Hang Seng Index: UP 1.7 per cent at 25,757.29 (close)
Shanghai — Composite: UP 0.4 per cent at 4,124.19 (close)
Euro/dollar: DOWN at US$1.1604 from US$1.1609 on Thursday
Pound/dollar: UP at US$1.3385 from US$1.3357
Dollar/yen: UP at 157.88 yen from 157.59 yen
Euro/pound: DOWN at 86.67 pence from 87.00 pence — AFP
