LONDON: Oil prices surged on Thursday as investors reacted to fears of escalating conflict in the Middle East, following US President Joe Biden’s comments regarding possible Israeli strikes on Iranian oil facilities.
The Brent crude benchmark topped $77 per barrel, while the US West Texas Intermediate (WTI) rose to nearly $74, both reflecting gains of more than five percent before easing slightly.
The uptick in oil prices came after Biden confirmed discussions around potential Israeli retaliatory measures against Iran in light of its recent missile barrage targeting Israel.
“Markets are in a state of suspense, bracing for Israel’s anticipated retaliation against Iran—a move that could catapult oil prices skyward,” remarked independent market analyst Stephen Innes.
The stock markets responded variably to the heightened geopolitical tensions. The Dow Jones Industrial Average and the broader S&P 500 index experienced declines in New York, down 0.4% and 0.1%, respectively.
In contrast, the tech-heavy Nasdaq managed a slight gain of 0.1%. European markets also closed in the red, with London’s FTSE 100 dropping 0.1%, Paris’ CAC 40 down 1.3%, and Frankfurt’s DAX losing 0.8%.
Investor sentiment was further influenced by a dockworkers’ strike in the US and ongoing speculation about the Federal Reserve’s next interest rate moves, with a key employment report due on Friday.
The dollar strengthened as a safe-haven asset, with the British pound falling over one percent against the greenback, following comments from Bank of England Governor Andrew Bailey suggesting quicker cuts to UK borrowing costs.
In Asia, the Nikkei 225 closed 2% higher as a weaker yen benefitted exporters. However, Hong Kong’s Hang Seng Index fell for the first time in over a week after a recent rally driven by China’s aggressive economic stimulus measures.
As tensions rise in the Middle East, fears mount that the conflict involving Israel, Hezbollah, and Iran may expand. Israel’s military reported conducting strikes on Hezbollah’s intelligence headquarters in Beirut, while Iranian officials warned of severe military response if Israel retaliates.
Despite the spike in oil prices, some analysts suggest that gains may be limited due to an increase in US stockpiles and Libya’s eastern administration announcing the end of a month-long production and export blockade.
As investors await the crucial US non-farm payroll jobs report on Friday, market analysts are keenly focused on how domestic economic performance might influence future Federal Reserve policy, particularly following a surprise uptick in private sector hiring reported earlier this week.
Key market figures as of 1550 GMT include:
Brent North Sea Crude: Up 3.8% at $76.73 per barrel
West Texas Intermediate: Up 4.1% at $73.00 per barrel
New York – Dow: Down 0.4% at 42,031.54 points
New York – S&P 500: Down 0.1% at 5,705.02 points
New York – Nasdaq: Up 0.1% at 17,944.63 points
London – FTSE 100: Down 0.1% at 8,282.52 (close)
Paris – CAC 40: Down 1.3% at 7,477.78 (close)
Frankfurt – DAX: Down 0.8% at 19,015.41 (close)
Tokyo – Nikkei 225: Up 2.0% at 38,552.06 (close)
Hong Kong – Hang Seng Index: Down 1.5% at 22,113.51 (close)
