Oil prices soared Thursday, briefly trading above $100, and stock markets extended losses as fresh attacks against Gulf energy targets offset the release of crude reserves by major economies.
Meanwhile, the International Energy Agency said the Mideast war “is creating the largest supply disruption in the history of the global oil market”, a day after its member countries agreed to unlock 400 million barrels of oil from their reserves — their largest release ever.
The move was unable to overcome fears about the choking of energy supplies, however, with the Strait of Hormuz — through which a fifth of global crude passes — effectively shut down by Iranian retaliatory attacks against ships and its Gulf neighbours.
An attack on two oil tankers off Iraq killed at least one crew member, while a cargo ship caught fire after being hit by shrapnel.
In its latest market report, the IEA said daily global crude production was down at least 8.0 million barrels, with an additional 2.0 million in petroleum products impacted, or about 7.5 percent of total daily production.
The price of Brent North Sea crude, the international benchmark, peaked at $101.59 per barrel on Thursday.
Prices pulled back only to rise again as US President Donald Trump said Thursday that stopping Iran from getting nuclear weapons was more important to him than controlling oil prices.
At $100 per barrel, Brent is up around 38 percent from the eve of the conflict which began 13 days ago when the United States and Israel launched airstrikes against Iran.
“Energy markets have been rattled by news of Iranian attacks on shipping in the Persian Gulf, along with missiles aimed at countries across the region,” said Trade Nation analyst David Morrison.
“The US’s inability to reopen the Strait of Hormuz and provide security for the shipping passing through, suggests that there are limits to their dominance,” he added.
The IEA release of strategic reserves is equivalent to about 20 days of supplies that transit through the Strait of Hormuz, which has been effectively shut down owing to Iranian attacks on ships.
Morrison said that if the announcements of the release of oil from strategic reserves “were supposed to cap prices, then they failed dismally”.
The rise in oil prices is forcing airlines to adjust.
New Zealand’s national airline said it would cancel 1,100 flights over the next two months, while Hong Kong aviation giant Cathay Pacific meanwhile announced new jet fuel surcharges for most routes and Air France-KLM said it was hiking ticket prices.
“The longer the oil price remains elevated, the more damaging and long lasting the inflation shock will be for the global economy,” noted Kathleen Brooks, research director at trading group XTB.
Wall Street’s main stock indices moved lower at the opening bell, with the Dow dropping more than one percent.
Most European equity markets were lower in afternoon trading, with most Asian markets finishing in the red.
The dollar mostly rose against rival currencies.
“The dollar has strengthened, driven by safe-haven demand, fears of inflation, and higher-for-longer interest rate expectations,” said Victoria Scholar, head of investment at Interactive Investor.
Key figures at around 1330 GMT –
Brent North Sea Crude: UP 8.7 percent at $99.94 per barrel
West Texas Intermediate: UP 8.6 percent at $94.77 per barrel
New York – Dow: DOWN 1.1 percent at 46,879.88 points
New York – S&P 500: DOWN 0.8 percent at 6,720.28
New York – Nasdaq Composite: DOWN 0.9 percent at 22,522.95
London – FTSE 100: DOWN 0.5 percent at 10,305.77
Paris – CAC 40: DOWN 0.5 percent at 7,998.74
Frankfurt – DAX: DOWN 0.4 percent at 23,540.30
Tokyo – Nikkei 225: DOWN 1.0 percent at 54,452.96 (close)
Hong Kong – Hang Seng Index: DOWN 0.7 percent at 25,716.76 (close)
Shanghai – Composite: DOWN 0.1 percent at 4,129.10 (close)
Euro/dollar: DOWN at $1.1537 from $1.1574 on Wednesday
Pound/dollar: DOWN at $1.3381 from $1.3419
Dollar/yen: UP at 158.98 yen from 158.92 yen
Euro/pound: DOWN at 86.23 pence from 86.25 pence
