️ The intensifying conflict in the Middle East and growing concerns over its duration have led to a spike in gas prices and a tumble in global stock markets.
️ UK gas prices surged to a three-year high, while the Brent crude oil benchmark briefly rose above $85 a barrel for the first time since... July 2024.
️ Share prices of companies on US, European, and Asian stock markets plunged sharply.
️ Following strikes by Israel and the US on Iran and Tehran's retaliation, investors have been weighing the potential economic impact, including implications for inflation and interest rates.
️ There are fears that the fight in a region crucial to global energy supplies and shipping routes could have a similar impact to Russia's full-scale invasion of Ukraine four years ago, which pushed up energy costs worldwide.
️ The UK's Office for Budget Responsibility warned in its latest outlook that the escalation could upset forecasts and have "very significant impacts on the global and UK economies."
️ German Chancellor Friedrich Merz, who met with Trump at the White House, also voiced concerns about economic damage.
️ The FTSE 100 index in London fell 2.75%, while Germany and France's main indexes closed down 3.44% and 3.46% respectively.
️ In the US, the S&P 500 fell sharply at the open but recovered some losses, ending down 0.9%.
️ In Asia, Japan's Nikkei fell 3.3%, with Hong Kong and mainland China indexes also down, and South Korea's Kospi dropping over 7%.
️ The benchmark UK gas price rose above 165p a therm, a level last seen a year after the Ukraine war began, closing at 138p a therm—over a fifth higher than Monday's price.
️ The spike in gas prices came after QatarEnergy, a major global exporter, halted production due to "military attacks" on its facilities.
️ Higher gas prices could pressure household energy bills, though any impact in the UK may not be seen until July due to a price cap.
️ Oil prices have not risen as sharply as gas due to greater sourcing flexibility, but remain much higher than last Friday's levels.
️ Rising oil prices can affect the economy by increasing costs for motor fuel, transport, and food.
️ The Strait of Hormuz is critical to the global economy, with about 20% of the world's oil and gas passing through, but traffic has halted after recent vessel attacks.
️ Ebrahim Jabbari, an adviser to Iran's Islamic Revolutionary Guard Corps commander, told state TV that ships "should not come to this region, they will certainly face a serious response from us."
️ The conflict has also triggered a rise in oil transport costs, with supertanker hire rates from the Middle East to China hitting a record high of over $400,000 per day.
️ Sanne Manders, president of Flexport, told the BBC the Strait of Hormuz is "effectively closed" due to carrier risk aversion and insurance companies refusing coverage.
️ Alasdair Locke, chairman of the UK's largest independent forecourt operator, warned households are likely to see higher fuel prices if oil costs remain elevated.
