Oil prices soar after Israel launches strikes on Iran's capital
Oil prices have surged after Israel launched an attack on Iran's nuclear programme with financial markets anxious over retaliatory action.
The price of Brent crude jumped nearly 10% higher at one stage before easing back a little to stand 7% higher at 74 US dollars a barrel.
London's FTSE 100 Index dropped 0.6%, down 56 points to 8828.6, in early morning trading on Friday after heavy overnight losses on Asian stock markets as the worries spooked investors, with the UK's top tier falling back from a record high set in the previous session.
The strikes by Israel on Iran's capital Tehran early on Friday are said to be the most significant attack the country has faced since its 1980s war with Iraq and have led to concerns over an all-out conflict between the two Middle Eastern countries.
In Washington, the Trump administration said it had not been involved in the attack and warned Iran not to retaliate against US interests or personnel.
It threatens disruption to the supply of crude from the Middle East while some traders flagged concerns it could also impact the flow of liquified natural gas (LNG) if tensions escalate.
Rising oil prices could threaten to push up inflation in the UK, possibly impacting the outlook for further interest rate cuts.
The Bank of England has been cutting rates but, as inflation strays further from the 2% target, it has less leeway to bring down borrowing costs.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: 'It's not just the outlook for Iranian exports that's a concern but also the potential for disruption to shipping in the Persian Gulf's Strait of Hormuz, a key route for about 20% of global oil flows and an even higher proportion of liquified natural gas haulage.'
He added: 'The escalation of military action adds another factor to consider for central bankers in an already complex world as they weigh up the inflationary impact of ever-changing tariff rates and a weakening outlook for jobs and growth.'
On the London market, oil giants BP and Shell were among the biggest risers on the steep gains in the cost of crude, with shares up 2% for both firms.
Aerospace giant BAE Systems was also moving higher as the threat of a full-scale war in the Middle East put defence stocks back in the spotlight, with the stock up 3%.
But London-listed airlines were down sharply, hit by a double whammy as rising oil prices spell higher fuel costs for the sector and following the devastating air crash in India.
British Airways owner International Consolidated Airlines fell more than 4% and easyJet was just under 4% lower in morning trading.
Gold prices also leaped towards another fresh record as investors raced for safe haven assets, which could see it breach the 3,431 US dollars-an-ounce high set earlier this month.
Kathleen Brooks, research director at XTB, said: 'If the oil price continues to climb towards 100 US dollars in the coming days, then we could see the interest rate futures market price out rate cuts from the US and Europe, which may add to downside pressure on stocks.
'However, if there is no nuclear escalation, then we think we could see oil prices settle back around 70 US dollars per barrel.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
BreakingNews.ie
29 minutes ago
- BreakingNews.ie
How could Iran retaliate after US strikes its nuclear programme?
Iran has spent decades building multi-tiered military capabilities at home and across the region that were at least partly aimed at deterring the United States from attacking it. By entering Israel's war, the US may have removed the last rationale for holding them in reserve. Advertisement That could mean a wave of attacks on US forces in the Middle East, an attempt to close a key bottleneck for global oil supplies, or a dash to develop a nuclear weapon with what remains of Iran's disputed programme after American strikes on three key sites. A decision to retaliate against the US and its regional allies would give Iran a far larger target bank and one that is much closer than Israel, allowing it to potentially use its missiles and drones to greater effect. The US and Israel have far superior capabilities, but those have not always proven decisive in America's recent history of military interventions in the region. Since Israel started the war with a surprise bombardment of Iran's military and nuclear sites on June 13, Iranian officials from the supreme leader down have warned the US to stay out, saying it would have dire consequences for the entire region. Advertisement It should soon be clear whether those were empty threats or a grim forecast. One theory is that Iran's next move might be to target the Strait of Hormuz. The narrow mouth of the Persian Gulf sees 20% of all oil traded globally pass, and at its narrowest point it is just 21 miles wide. Any disruption there could send oil prices soaring worldwide and hit American pocket. A satellite image shows vehicles at the Fordo enrichment facility in Iran on June 20 (Maxar Technologies/AP) Iran boasts a fleet of fast-attack boats and thousands of naval mines that could potentially make the strait impassable, at least for a time. It could also fire missiles from its long Persian Gulf shore, as its allies, Yemen's Houthi rebels, have done in the Red Sea. The US, with its 5th Fleet stationed in nearby Bahrain, has long pledged to uphold freedom of navigation in the strait and would respond with far superior forces. Advertisement But even a relatively brief firefight could paralyse shipping traffic and spook investors, causing oil prices to spike and generating international pressure for a ceasefire. Another theory is for Tehran to attack US bases and allies in the region. The US has tens of thousands of troops stationed in the Middle East, including at permanent bases in Kuwait, Bahrain, Qatar and the United Arab Emirates, Arab Gulf countries just across the Persian Gulf from Iran – and much closer than Israel. Those bases boast the same kinds of sophisticated air defences as Israel, but would have much less warning time before waves of missiles or swarms of armed drones. Even Israel, which is several hundred miles further away, has been unable to stop all of the incoming fire. Advertisement Iran could also choose to attack key oil and gas facilities in those countries with the goal of exacting a higher price for US involvement in the war. A drone attack on two major oil sites in Saudi Arabia in 2019 – claimed by the Houthis but widely blamed on Iran – briefly cut the kingdom's oil production in half. Iran could also opt to activate its regional allies. Tehran's so-called Axis of Resistance – a network of militant groups across the Middle East, is a shadow of what it was before the war ignited by Hamas's October 7, 2023, attack on Israel out of the Gaza Strip – but it still has some formidable capabilities. Israel's 20-month war in Gaza has severely diminished the Palestinian Hamas and Islamic Jihad groups, and Israel mauled Lebanon's Hezbollah last autumn, killing most of its top leadership and devastating much of southern Lebanon, making its involvement unlikely. But Iran could still call on the Houthis, who had threatened to resume their attacks in the Red Sea if the US entered the war, and allied militias in Iraq. Both have drone and missile capabilities that would allow them to target the United States and its allies. Advertisement Iran could also seek to respond through militant attacks further afield, as it is widely accused of doing in the 1990s with an attack on a Jewish community centre in Argentina that was blamed on Iran and Hezbollah. It is also feared Tehran may now sprint towards nuclear arms. It could be days or weeks before the full impact of the US strikes on Iran's nuclear sites is known. But experts have long warned that even joint US and Israeli strikes would only delay Iran's ability to develop a weapon, not eliminate it. That is because Iran has dispersed its programme across the country to several sites, including hardened, underground facilities. Iran would likely struggle to repair or reconstitute its nuclear programme while Israeli and US warplanes are circling overhead. But it could still decide to fully end its co-operation with the International Atomic Energy Agency (IAEA) and abandon the Nuclear Nonproliferation Treaty. North Korea announced its withdrawal from the treaty in 2003 and tested a nuclear weapon three years later, but it had the freedom to develop its programme without punishing air strikes. Iran insists its programme is peaceful, though it is the only non-nuclear-armed state to enrich uranium up to 60%, a short, technical step away from weapons-grade levels of 90%. US intelligence agencies and the IAEA assess Iran has not had an organised military nuclear programme since 2003. Israel is widely believed to be the only nuclear-armed state in the Middle East but does not acknowledge having such weapons.
The Independent
39 minutes ago
- The Independent
How Iran could retaliate after US bombs its nuclear program
Iran has spent decades building multi-tiered military capabilities at home and across the region that were at least partly aimed at deterring the United States from attacking it. By entering Israel's war, the U.S. may have removed the last rationale for holding them in reserve. Thet could mean a wave of attacks on U.S. forces in the Middle East, an attempt to close a key bottleneck for global oil supplies or a dash to develop a nuclear weapon with what remains of Iran's disputed program after American strikes on three key sites. A decision to retaliate against the U.S. and its regional allies would give Iran a far larger target bank and one that is much closer than Israel, allowing it to potentially use its missiles and drones to greater effect. The U.S. and Israel have far superior capabilities, but those haven't always proven decisive in America's recent history of military interventions in the region. Ever since Israel started the war with a suprise bombardment of Iran's military and nuclear sites on June 13, Iranian officials from the supreme leader on down have warned the U.S. to stay out, saying it would have dire consequences for the entire region. It should soon be clear whether those were empty threats or a grim forecast. Here's a look at what Iran's next move might be. Targeting the Strait of Hormuz The Strait of Hormuz is the narrow mouth of the Persian Gulf, through which some 20% of all oil traded globally passes, and at its narrowest point it is just 33 kilometers (21 miles) wide. Any disruption there could send oil prices soaring worldwide and hit American pocketbooks. Iran boasts a fleet of fast-attack boats and thousands of naval mines that could potentially make the strait impassable, at least for a time. It could also fire missiles from its long Persian Gulf shore, as its allies, Yemen's Houthi rebels, have done in the Red Sea. The U.S., with its 5th Fleet stationed in nearby Bahrain, has long pledged to uphold freedom of navigation in the strait and would respond with far superior forces. But even a relatively brief firefight could paralyze shipping traffic and spook investors, causing oil prices to spike and generating international pressure for a ceasefire. Attacking US bases and allies in the region The U.S. has tens of thousands of troops stationed in the region, including at permanent bases in Kuwait, Bahrain, Qatar and the United Arab Emirates, Arab Gulf countries just across the Persian Gulf from Iran — and much closer than Israel. Those bases boast the same kinds of sophisticated air defenses as Israel, but would have much less warning time before waves of missiles or swarms of armed drones. And even Israel, which is several hundred kilometers (miles) further away, has been unable to stop all of the incoming fire. Iran could also choose to attack key oil and gas facilities in those countries with the goal of exacting a higher price for U.S. involvement in the war. A drone attack on two major oil sites in Saudi Arabia in 2019 — claimed by the Houthis but widely blamed on Iran — briefly cut the kingdom's oil production in half. Activating regional allies Iran's so-called Axis of Resistance — a network of militant groups across the Middle East, is a shadow of what it was before the war ignited by Hamas' Oct. 7, 2023, attack on Israel out of the Gaza Strip — but it still has some formidable capabilities. Israel's 20-month war in Gaza has severely diminished the Palestinian Hamas and Islamic Jihad groups, and Israel mauled Lebanon's Hezbollah last fall, killing most of its top leadership and devastating much of southern Lebanon, making its involvement unlikely. But Iran could still call on the Houthis, who had threatened to resume their attacks in the Red Sea if the U.S. entered the war, and allied militias in Iraq. Both have drone and missile capabilities that would allow them to target the United States and its allies. Iran could also seek to respond through militant attacks further afield, as it is widely accused of doing in the 1990s with an attack on a Jewish community center in Argentina that was blamed on Iran and Hezbollah. A sprint toward nuclear arms It could be days or weeks before the full impact of the U.S. strikes on Iran's nuclear sites is known. But experts have long warned that even joint U.S. and Israeli strikes would only delay Iran's ability to develop a weapon, not eliminate it. That's because Iran has dispersed its program across the country to several sites, including hardened, underground facilities. Iran would likely struggle to repair or reconstitute its nuclear program while Israeli and U.S. warplanes are circling overhead. But it could still decide to fully end its cooperation with the International Atomic Energy Agency and abandon the the Nuclear Nonproliferation Treaty. North Korea announced its withdrawal from the treaty in 2003 and tested a nuclear weapon three years later, but it had the freedom to develop its program without punishing airstrikes. Iran insists its program is peaceful, though it is the only non-nuclear-armed state to enrich uranium up to 60%, a short, technical step away from weapons-grade levels of 90%. U.S. intelligence agencies and the IAEA assess Iran hasn't had an organized military nuclear program since 2003. Israel is widely believed to be the only nuclear-armed state in the Middle East but does not acknowledge having such weapons.
Reuters
42 minutes ago
- Reuters
Tel Aviv shares jump at open, hit record highs, after US strikes Iran nuclear sites
TEL AVIV, June 22 (Reuters) - Israeli stocks opened more than 1.5% higher on Sunday and hit fresh all-time highs after the United States attacked Iran's nuclear sites. The broad Tel Aviv 125 index (.TA125), opens new tab was 1.5% higher, while the blue-chip TA-35 (.TA35), opens new tab was 1.6% higher in early trading. Shares rose during all five sessions last week, gaining some 6%, as Israel struck Iranian nuclear and military targets.
