Oil prices surged above $100 while global stocks fell on Thursday as renewed Iranian attacks targeting energy infrastructure in the Middle East and threats to the global economy overshadowed a record release of strategic crude reserves by the International Energy Agency.
The IEA announced on Wednesday that its members had agreed to release 400 million barrels of oil from their reserves, the largest coordinated stockpile release in the agency’s history.
However, the move failed to ease market fears about disruptions to energy supplies from the Middle East, particularly as the Strait of Hormuz—through which roughly one-fifth of the world’s crude oil passes—was effectively shut down.
As Iran intensified efforts to disrupt regional supplies, two tankers in Iraqi waters were reportedly struck on Thursday. Baghdad had already announced plans to cut oil output because of the crisis, with Kuwait and Saudi Arabia following similar measures.
Bahrain also reported that Iran had carried out an attack on fuel storage tanks in the country. Saudi Arabia said it had intercepted drones headed for the Shaybah oil field, while drones struck fuel tanks at Oman’s Salalah port, forcing authorities to suspend operations there.
In another development, the United Kingdom Maritime Trade Operations agency said in an alert on Thursday that a container ship near the United Arab Emirates had been hit by an “unknown projectile.”
Brent crude rose to a high of $101.59 per barrel, while West Texas Intermediate climbed to nearly $96. Both benchmarks had already surged as much as 30 per cent on Monday to almost $120 before later trimming some of those gains.
Despite the pullback, analysts warned that with hostilities showing no signs of easing, prices between $90 and $100 per barrel could become the new normal for some time.
Iran signalled it was prepared for a prolonged conflict, warning that a war of attrition could devastate the global economy and threatening vessels linked to the United States and its allies.
The Islamic Revolutionary Guard Corps on Wednesday warned it could strike “economic centres and banks” connected to US and Israeli interests.
“They must consider the possibility that they will be engaged in a long-term war of attrition that will destroy the entire American economy and the world economy,” Ali Fadavi, an adviser to the Guards’ commander-in-chief, said in comments broadcast on state television.
Iran’s Tasnim news agency also published a list of potential technology-related targets, including offices belonging to Amazon, Google, Microsoft and Nvidia in Gulf countries and Israel.
Analysts say any prolonged disruption to shipping through the Strait of Hormuz—an artery that also carries roughly a third of the fertiliser used in global food production—could deliver a severe economic shock, particularly in Asia and Europe.
Airlines have been among the sectors hardest hit, as many are reconsidering routes through the Middle East while also facing rising fuel costs.
Air New Zealand said on Thursday it would cancel about 1,100 flights over the next two months, while Hong Kong carrier Cathay Pacific announced new fuel surcharges on most routes that are roughly double existing levels.
New Zealand’s government also said it was considering using decades-old emergency laws that restrict vehicle use if fuel supplies begin to dwindle.
Australian officials, meanwhile, announced plans to temporarily relax fuel quality standards by allowing higher sulphur levels for about two months, a measure expected to release around 100 million litres of fuel into the domestic market.
The surge in oil prices has renewed fears of another spike in global inflation and the possibility that central banks may have to raise interest rates again, after many had been considering rate cuts just last month.
Those concerns weighed on equities, with markets across Asia retreating on Thursday. Major indices in Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Mumbai, Wellington, Singapore, Taipei, Manila and Jakarta all closed lower, while European markets in London, Paris and Frankfurt also opened in the red.
Stephen Innes of SPI Asset Management said the release of emergency oil reserves was unlikely to significantly calm markets while tensions around the Strait of Hormuz remained high.
“When the geopolitical fire alarm is still ringing around the Strait of Hormuz, dumping barrels from emergency stockpiles is less a solution than a symbolic gesture,” he said. “It might dampen volatility for a few hours, but it cannot change the geometry of risk when the world’s most important shipping artery is under threat.”
In trading terms, he added, the IEA release was “the equivalent of pointing a garden hose at a refinery blaze.”
US President Donald Trump, however, reiterated his claim that recent strikes had already significantly weakened Iran.
“They are pretty much at the end of the line,” he told reporters after delivering a speech to supporters in which he declared, “We’ve won. We won — in the first hour it was over.”
Israel’s military signalled the conflict was far from finished, saying it still had “a broad bank of targets.”
Oil prices remained elevated in early trading on Thursday, with West Texas Intermediate rising to $90.72 per barrel and Brent North Sea crude climbing to $96.04. Meanwhile, the Nikkei 225 in Tokyo closed down 1.0 per cent at 54,452.96, the Hang Seng Index in Hong Kong fell 0.7 per cent to 25,716.76, and the Shanghai Composite slipped 0.1 per cent to 4,129.10. London’s FTSE 100 was down 0.6 per cent at 10,296.02, while the Dow Jones Industrial Average in New York had earlier closed 0.6 per cent lower at 47,417.27.
Currency markets also reflected the cautious mood, with the euro trading at $1.1542 against the dollar, the pound at $1.3379, and the dollar at 158.89 yen.
AFP
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