Oil prices rose on Monday and the U.S. dollar gained ground after American forces targeted Iranian nuclear facilities over the weekend.
Most Asian stock markets declined, though Chinese indices advanced, as investors awaited Iran’s potential response. A major concern is that Iran might disrupt global oil markets by attempting to block the Strait of Hormuz — a vital shipping route for about 20% of the world’s oil supply.
Iran, ranked ninth globally in oil production, pumps around 3.3 million barrels per day, exporting just under half and using the remainder domestically.
At the start of Monday trading, Brent crude and U.S. benchmark WTI surged over 4%, hitting their highest levels since January. Gains later moderated, with both rising around 1.1% by the Asian afternoon session.
“Satellite images indicate oil is still passing through the Strait, which may be tempering the market’s reaction,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. She noted that many investors are hopeful Iran will avoid escalation to protect its own oil infrastructure and maintain stability for China, its biggest buyer.
However, she warned that if tensions escalate further, U.S. crude prices could surge past $100 a barrel. On Monday, WTI was trading at around $75.
Potential Fallout –
MUFG economists cautioned that a significant oil price shock could have a negative impact on many Asian economies, which heavily rely on energy imports.
In market movements, Tokyo’s Nikkei dipped 0.1%, Seoul dropped 0.2%, Sydney slipped 0.4%, and Jakarta fell 1.7%. Conversely, Hong Kong rose 0.6% and Shanghai gained 0.7%. European markets opened lower, with declines in London, Frankfurt, and Paris.
The dollar strengthened against major currencies, although analysts questioned the sustainability of this momentum. “If this is merely a short-term reaction to U.S. involvement in the Middle East, the dollar’s long-term downtrend may continue,” said Sebastian Boyd of Bloomberg.
Chris Weston of Pepperstone added that Iran could inflict economic disruption without fully closing the Strait of Hormuz. He suggested that even the threat of such an action could raise maritime shipping costs and affect global crude and gas supplies.
Weston also noted that while the U.S. remains focused on Middle East tensions, developments in trade negotiations could soon add further pressure to the markets.
• Key figures at around 0700 GMT –
Brent North Sea Crude: UP 1.1 percent at $78.08 per barrel
West Texas Intermediate: UP 1.1 percent at $74.89 per barrel
Tokyo – Nikkei 225: DOWN 0.1 percent at 38,354.09 (close)
Hong Kong – Hang Seng Index: UP 0.6 percent at 23,661.88
Shanghai – Composite: UP 0.7 percent at 3,381.58 (close)
London – FTSE 100: DOWN 0.3 percent at 8,743.99
Euro/dollar: DOWN at $1.1512 from $1.1516 on Friday
Pound/dollar: UP at $1.3445 from $1.3444
Dollar/yen: UP at 147.14 yen from 146.13 yen
Euro/pound: DOWN at 85.62 pence from 85.66 pence
New York – Dow: UP 0.1 percent at 42,206.82 (close)
AFP
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