In brief
Following Israel's military attack on Iran, oil prices spiked over 10%, impacting global markets and raising concerns about potential disruptions in oil supply from the critical Strait of Hormuz.
Global oil prices have taken a sharp turn upward after Israel launched significant military strikes on Iran. This escalation in Middle Eastern tensions sent the price of Brent crude oil soaring by more than 10%, marking its highest point since January. Traders are wary that the conflict could hamper oil supplies from this energy-rich region. Initially, oil prices rose quickly, before easing slightly to about $74.47 per barrel, though still up by over 5% from Thursday. It's noteworthy that current prices remain more than 10% lower than last year, significantly below the levels seen in early 2022 following Russia’s invasion of Ukraine.Market reactions were also felt in stock exchanges across Asia and Europe, where share prices plummeted, including a 1.5% drop in the Dow Jones. In contrast, traditional "safe haven" investments like gold and the Swiss franc increased in value, showcasing a shift in investor behavior amid uncertainty. Gold hit a near two-month high at $3,423.30 per ounce.The Israeli Defense Forces (IDF) have stated that Iran retaliated by launching about 100 drones towards Israel. Analysts suggest that traders will closely monitor how escalating tensions affect oil markets in the coming days, with potential for prices to hit $80-$100 a barrel if Iran's oil infrastructure comes under attack.Rod Dennis from the UK's RAC emphasized the ongoing uncertainty regarding petrol prices, suggesting that current wholesale fuel prices and retailer margins will play a crucial role in determining future costs at the pump.In a worst-case scenario, Iran could respond by disrupting oil supply routes in the strategically vital Strait of Hormuz, further complicating the global energy landscape. This area is responsible for transporting around 20% of the world's oil, making any interruptions potentially significant for global markets. As the situation develops, experts are keeping a close watch on whether it diffuses quickly or spirals into a larger conflict affecting the energy supply.
