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Oil prices spike amid Middle East conflict
Global oil markets reacted sharply on Monday as the US-Israel war with Iran entered its fifth week, sending Brent crude prices above $115 a barrel before a slight retreat to $113. The surge marks the largest monthly gain on record, with analysts warning of further volatility.
Asian stocks tumble on escalating tensions
Investor unease spread across Asia, with Japan's Nikkei 225 dropping 2.8% and South Korea's Kospi closing nearly 3% lower. The declines followed weekend developments, including Iran-backed Houthi rebels in Yemen launching strikes on Israel and Tehran threatening expanded retaliatory attacks on US and Israeli officials.
US rhetoric and military movements heighten risks
In an interview with the Financial Times, US President Donald Trump suggested the possibility of seizing Iran's oil assets, including the strategic Kharg Island fuel hub. When questioned about Iranian defenses, he dismissed them as negligible, drawing parallels to the US's recent moves in Venezuela. Meanwhile, Iran's parliament speaker issued a warning to American forces as 3,500 additional US troops arrived in the Middle East.
Shipping and supply chain disruptions fuel concerns
Energy markets have been roiled by Tehran's threats to blockade the Strait of Hormuz, a critical chokepoint for global oil shipments. Lars Jensen, a shipping expert and former Maersk director, cautioned that even if the strait reopened immediately, price pressures would persist due to delayed shipments from the Persian Gulf.
"The impact of this conflict could surpass the 1970s oil crisis, which triggered widespread economic turmoil," Jensen told the BBC.
Lars Jensen, Vespucci Maritime
Jensen also highlighted risks to food supplies, noting that 20-30% of the world's seaborne fertilizer originates from the Gulf region, foreshadowing potential spikes in food prices, particularly in low-income nations.
Analysts warn of prolonged economic fallout
Judith McKenzie of Downing investment firm noted that the full effects of the conflict on fuel prices have yet to reach consumers, with oil shocks typically taking time to filter through supply chains. She suggested that a resolution in the Gulf this week could mitigate inflationary pressures, though the process would remain gradual.
Sean Foley, an energy markets expert at Macquarie University, predicted further oil price increases unless tensions ease. He warned that Houthi actions near Yemen's Bab al-Mandeb strait could disrupt an additional 10% of global oil supplies, exacerbating supply chain strains.
"My biggest concern is a global economic slowdown as consumers face higher energy and food costs," said Andrew Lipow of Lipow Oil Associates.
Andrew Lipow, Lipow Oil Associates
Lipow projected Brent crude could climb to $130 a barrel in the coming weeks if threats to energy supplies persist. Prior to the US-Israel strikes on February 27, Brent traded at $72 a barrel. By March 18, it had peaked at $119.50, its highest level since June 2022.
