The oil price has hit its highest level since January, after the US bombed Iran’s nuclear facilities over the weekend.
Traders are in a largely risk-off mood, as they weigh up the chances of further escalation in the Middle East, and ponder possible Iranian retaliations. But there’s not a full-blown panic in the markets.
There was an early leap in the oil price when the new trading week began; crude prices surged over 4%, pushing a barrel of Brent crude to a five-month high of $81.40 a barrel.
But … it’s slipped back even before traders in the City of London reached their desks, and is now up 1.7% at $78.32 a barrel.
Yesterday, Iran’s parliament voted to shut down the Strait of Hormuz, though which a fifth of the world’s oil is transported. If it happened, that could create a supply shock that drives up the price of energy, fuelling inflation and hurting growth.
In response, Marco Rubio, the US secretary of state, warned it would be “economic suicide” for Iran to close the Strait, and urged China to sway Tehran on this point.
Rubio told Fox News: “I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the straits of Hormuz for their oil.”
The head of the International Monetary Fund has warned that last weekend’s US strikes on Iran could hurt global growth, if the consequence ripple beyond the energy markets.
Kristalina Georgieva told Bloomberg TV this morning that the Middle East crisis added to global uncertainty, saying: “We are looking at this as another source of uncertainty in what has been a highly uncertain environment.”
Georgieva said the IMF was watching energy prices closely, warning that a rise in oil prices could have knock-on economic impact. She added: “There could be secondary and tertiary impacts. Let’s say there is more turbulence that goes into hitting growth prospects in large economies — then you have a trigger impact of downward revisions in prospects for global growth.”
Georgieva is also hoping that energy supply routes will not be disrupted, saying:“Let’s see how events will develop. I pray no.”
The US dollar has risen, a little, against a basket of currencies today as investors seek out safe haven assets.The dollar index has gained 0.3% this morning, while the pound has slipped by 0.1% to $1.3433.
Stock markets across the Asia-Pacific region are mixed today, as investors take events in the Middle East in their stride.
Japan’s Nikkei 225 index has dipped by 0.17%, while Australia’s S&P/ASX 200 index has lost 0.35%.
The mood in China is brighter, though, where the CSI 300 index is up 0.44%. Hong Kong’s Hang Seng has gained 0.55%.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, says there is a “fascinating calm” in the markets after the US attack on Iran, adding: "Global equities will likely remain under pressure at the open – but judging by how oil prices reacted to the weekend news, the selloff could remain relatively soft compared with the heaviness of the headlines.
"S&P futures [the US stock market] are down about 0.30% – they’re behaving like a normal Monday. And that, I find extremely interesting. It really feels like markets have become increasingly unreactive to the news. The lack of reaction is fascinating."
The agenda
• Today: UK government to publish its industrial strategy
• 9am BST: Eurozone flash PMI manufacturing and services survey for June
• 9.30am BST: UK flash PMI manufacturing survey and services for June
• 2pm BST: Christine Lagarde testifies to the Committee on Economic and Monetary Affairs of the European Parliament in Brussels
• 2.45pm BST: US flash PMI manufacturing survey and services for June
We'll be tracking all the main events throughout the day … |
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