Energy prices soar on Iran war fallout, stocks slide ~ EconomyLens.com

London (AFP) – Oil and gas prices soared, stock markets slid, and the dollar firmed on Monday as the widening Iran war shook financial markets across the globe. European natural gas prices rocketed more than 50 percent higher after Qatar’s state-run energy firm said it had halted liquefied natural gas production following Iranian attacks on facilities at two of its main gas processing bases. Meanwhile, world crude futures surged over seven percent on fears of disruption to supplies, with the vital Strait of Hormuz — through which around 20 percent of global seaborne oil passes — effectively shut and several ships attacked.

Wall Street’s main indices fell more than one percent at the start of trading but trimmed their losses in morning trading. Equities took a harder hit in Europe and Asia as investors exited trades in favor of the dollar and gold, seen as safer bets in times of economic unrest. The greenback jumped around one percent against its major rivals, while gold added one percent to $5,298.90 an ounce. “Investors are scuttling towards safe havens, seeking shelter as conflict widens in the Middle East,” noted Susannah Streeter, chief investment strategist at Wealth Club. “What happened over the weekend and what continues now has created added uncertainty,” said Briefing.com analyst Patrick O’Hare. However, there has not been a rout on equity markets “because participants are not convinced yet the military action will fuel disarray for the global economy.”

Airline share prices took a battering as carriers were forced to cancel flights, and Dubai’s airport took a hit, although it later said it would resume limited flights. Shares in British Airways owner IAG lost 5.2 percent and Air France-KLM fell nine percent. Delta shed 2.9 percent and United fell 4.1 percent. There were sizeable gains for share prices of energy majors and defense companies, with BAE Systems jumping 5.4 percent in London and Palantir climbing 5.4 percent in New York. Shell rose 2.8 percent and TotalEnergies 3.5 percent. ExxonMobil shares added 1.3 percent in New York. “If higher oil prices persist, it raises the risk of stickier headline inflation,” wrote Saxo Markets’ Charu Chanana.

This could prove troublesome for US President Donald Trump, who has promised his electorate low prices as the United States approaches mid-term elections in November. Rising energy prices, increased shipping costs, and loss of revenue for air transport could have “a harmful effect on growth,” said economist Eric Dor from the IESEG School of Management in Paris. “If it’s a matter of three days, it’s not serious. But if it’s over a longer period, then it will have an additional recessionary effect,” he told AFP. “Today’s move in the gas market suggests that the conflict in the Middle East could have broad macro implications for the global economy,” said Kathleen Brooks, research director at XTB.

In theory, oil-importing countries have reserves, with OECD members required to maintain 90 days’ worth of stocks, but prices above $100 cannot be ruled out according to analysts. If the disruption at Hormuz continues, “no matter how much spare capacity, (it) is not going to fill that gap. That gap is just too big,” said Amena Bakr, head of Middle East and OPEC+ research at analysts Kpler. Key members of the OPEC+ oil cartel on Sunday announced a greater-than-expected increase to production quotas.

### Key figures at around 1630 GMT:

– Brent North Sea Crude: UP 7.2 percent at $78.12 per barrel

– West Texas Intermediate: UP 6.2 percent at $71.17 per barrel

– New York – Dow: DOWN 0.5 percent at 48,724.55 points

– New York – S&P 500: DOWN 0.4 percent at 6,849.68

– New York – Nasdaq Composite: DOWN 0.3 percent at 22,605.11

– London – FTSE 100: DOWN 1.2 percent at 10,780.11 (close)

– Paris – CAC 40: DOWN 2.2 percent at 8,394.32 (close)

– Frankfurt – DAX: DOWN 2.6 percent at 24,638.00 (close)

– Tokyo – Nikkei 225: DOWN 1.4 percent at 58,057.24 (close)

– Hong Kong – Hang Seng Index: DOWN 2.1 percent at 26,059.85 (close)

– Shanghai – Composite: UP 0.5 percent at 4,182.59 (close)