Crude oil prices rose more than two per cent on Monday, with Brent, the international benchmark, climbing above $90 per barrel as renewed US-Iran military exchanges heightened concerns over global energy supplies.
Brent crude gained 2.5 per cent to $90.26 a barrel, while West Texas Intermediate (WTI) also rose 2.5 per cent to $85.51 per barrel at about 1330 GMT.
The oil rally followed a fresh escalation in the conflict after the United States said it had struck Iranian rocket launchers on a small island in the Strait of Hormuz, marking its first attack on Iran in a month.
Iran subsequently retaliated by targeting US military positions in Jordan, while US President Donald Trump said Washington would respond to Iranian attacks on American targets in the Middle East.
The latest exchange came as the US-Iran conflict reached its six-month mark and after hostilities had appeared to ease in recent weeks.
The renewed fighting has revived concerns over energy supplies, particularly as diplomatic efforts to end the conflict appear to have stalled. The Strait of Hormuz, a key global shipping route through which about one-fifth of the world’s crude oil and gas normally passes, remains largely closed.
“For oil traders, (the) move is another reminder of how quickly the geopolitical premium can return,” said Quintex Intel analyst Stephen Innes.
He said physical oil flows through the strait had improved significantly from their worst levels, prompting crude prices to give up some of the risk premium accumulated during the conflict.
However, Innes warned that the latest military exchanges showed how fragile the improvement remained and how quickly concerns over shipping could return to the market.
Stocks Under Pressure
While oil prices climbed, stocks on Wall Street opened lower on Monday as investors continued to digest hawkish signals from Federal Reserve chief Kevin Warsh.
US equities had already suffered losses on Friday after Warsh’s comments at the Jackson Hole symposium increased expectations that the Federal Reserve could raise interest rates in September.
Inflation in the United States remains elevated at 3.7 per cent, well above the Fed’s two per cent target.
Speaking at the annual gathering of central bankers and economists in Wyoming on Friday, Warsh described the inflation rate as “concerning” and said he would be “hard-pressed” to characterise current financial conditions as restrictive.
The remarks were widely interpreted as a signal that higher interest rates could be on the horizon, although Warsh stopped short of explicitly supporting a rate increase.
“I stand here today committed to a discipline, not to a decision,” he said.
The Dow Jones Industrial Average fell 0.5 per cent to 53,293.52 points at the start of trading on Monday, while the S&P 500 declined 0.3 per cent to 7,691.49. The Nasdaq Composite was down 0.2 per cent at 26,357.81.
Briefing.com analyst Patrick O’Hare said the equity futures market was showing a negative bias driven partly by the latest US-Iran military exchanges and rising yields on US government bonds.
Asian markets also struggled during the session, although some recovered later in the day, leaving regional indexes mixed.
In Europe, Paris edged higher while Frankfurt fell. London markets were closed for a public holiday.
Investors are now turning their attention to a series of key US economic data releases ahead of the Federal Reserve’s next policy meeting, with employment figures due this week and consumer price inflation data expected next week.
Key Market Figures at About 1330 GMT
- Brent crude: Up 2.5% at $90.26 per barrel
- WTI crude: Up 2.5% at $85.51 per barrel
- Dow Jones: Down 0.5% at 53,293.52
- S&P 500: Down 0.3% at 7,691.49
- Nasdaq: Down 0.2% at 26,357.81
- FTSE 100: Closed for a holiday
- CAC 40: Up less than 0.1% at 8,407.64
- DAX 40: Down 0.7% at 26,387.02
- Nikkei 225: Down 0.1% at 66,311.93
- Hang Seng: Down 0.1% at 25,566.99
- Shanghai Composite: Up 0.9% at 3,986.30
- Euro/dollar: Up at $1.1600 from $1.1586
- Pound/dollar: Up at $1.3545 from $1.3538
- Euro/pound: Up at 85.65 pence from 85.58 pence
- Dollar/yen: Down at 159.81 yen from 160.07 yen
