Oil prices spike after US strikes on Iran nuclear sites
TOKYO: Oil prices surged in early trade Monday on concerns of disruption to energy markets after US air strikes on Iran's nuclear facilities.
Asian stocks were lower as traders digested the weekend's events, with Iran threatening US bases in the Middle East as fears grow of an escalating conflict in the volatile region.
Iran is the world's ninth-biggest oil-producing country, with output of about 3.3 million barrels per day.
It exports just under half of that amount and keeps the rest for domestic consumption.
And if Tehran decides to retaliate, observers say one of its options would be to seek to close the strategic Strait of Hormuz -- which carries one-fifth of global oil output.
As trading opened on Monday, Brent and the main US crude contract WTI both jumped more than four per cent to hit their highest price since January.
They pared these gains, however and at around 0030 GMT Brent was up 2.2 per cent at $79.20 per barrel and WTI was 2.1 per cent higher at $75.98.
Economists at MUFG warned of "high uncertainty of the outcomes and duration of this war", giving a "scenario analysis" of an oil price increase of $10 per barrel.
"An oil price shock would create a real negative impact on most Asian economies" as many are big net energy importers, they wrote, reflecting the market's downbeat mood.
Tokyo's key Nikkei index was down 0.6 per cent while Seoul fell 1.4 per cent and Sydney was 0.7 per cent lower.
US Defense Secretary Pete Hegseth said Sunday that the strikes had "devastated the Iranian nuclear programme", though some officials cautioned that the extent of the damage was unclear.
It comes after Israel launched a bombing campaign against Iran earlier this month.
Chris Weston at Pepperstone said Iran was able to inflict economic damage on the world without taking the "extreme route" of trying to close the Strait of Hormuz.
"By planting enough belief that they could disrupt this key logistical channel, maritime costs could rise to the point that it would have a significant impact on the supply of crude and gas," he wrote in a note published Monday.
At the same time, "while Trump's primary focus will be on the Middle East, headlines on trade negotiations could soon start to roll in and market anxieties could feasibly build", he added.
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New Straits Times
35 minutes ago
- New Straits Times
Hormuz crisis could shake Malaysia's supply chains, inflation stability, experts warn
KUALA LUMPUR: The potential closure of the Strait of Hormuz could disrupt Malaysia's supply chains, fuel inflation and strain small businesses, economists have warned. Universiti Teknologi Mara Malaysian Academy of SME and Entrepreneurship Development coordinator Dr Mohamad Idham Md Razak said a shutdown of the vital shipping lane could cause far-reaching economic shockwaves. "Some 21 million barrels of oil pass through the Strait of Hormuz daily. If that flow is disrupted, vessels will be forced to divert around the Cape of Good Hope, adding 10 to 15 days in shipping time. "These delays will result in higher freight costs and fuel prices, which would directly impact Malaysia's just-in-time production processes, especially in manufacturing," he said. He added that rising import costs would squeeze margins for SMEs and raise inflationary pressures on consumers. While Malaysia may benefit from higher oil prices as a net energy exporter, Idham cautioned that the gains could be offset by rising import costs and the spill-over effects of global trade and supply chain dysfunction. "Malaysia imports roughly 30 per cent of its refined fuel, so petrol and diesel prices may rise by as much as 20 sen per litre. This could push overall core inflation up by one to two percentage points, disproportionately affecting lower-income households," he said. He said downstream sectors, particularly agriculture, logistics, and manufacturing, would face cascading cost increases, driven by higher fuel and transport expenses, he added. Port Klang, a key regional hub, could also see a decline in throughput as global shipping routes are disrupted and regional trade logistics become more volatile. "Malaysia's export base is diverse, but the manufacturing sector makes up about 31 per cent of GDP. "With limited fiscal space, such as the government debt standing at around 64 per cent of GDP, there is little room to provide broad subsidies or wage relief," he said. He warned that SMEs, which generally have less pricing power and thinner margins, are likely to bear the brunt of volatile input costs. "SMEs don't have the capacity to absorb price shocks the way large corporations do. Many are already operating in a tight environment. "A prolonged crisis could see closures or workforce reductions, further straining the economy." Idham added that the economic impact would extend beyond Malaysia, affecting many Asian economies heavily dependent on Middle Eastern energy imports and export-driven manufacturing. "Countries like China, Japan, and South Korea import large volumes of crude oil and liquefied natural gas from the Middle East. "A disruption would drive up their energy costs, widen trade deficits, and trigger inflationary pressure across key sectors," he said. Rising shipping costs and longer delivery times would also weaken Asia's export competitiveness, leading to higher prices for finished goods such as electronics, vehicles and machinery. Meanwhile, Universiti Utara Malaysia School of International Studies senior lecturer Asrar Omar said Asean countries would face both immediate and long-term consequences if the strait was closed. "The strait accounts for about 20 per cent of global oil shipments, much of which is destined for Asian markets including Asean. "A disruption would cause an immediate spike in oil prices, particularly in liquefied petroleum gas (LPG)," he said. Vietnam and Malaysia, he added, would be among the hardest hit due to their reliance on energy for manufacturing and semiconductor industries. "Higher fuel costs will drive up production costs and undermine competitiveness. "Asean nations would have to seek alternative and more expensive energy sources, compounding inflationary pressure," he said. He added that the tourism industry in Thailand could also be affected due to higher transport costs, while delays caused by shipping reroutes may lead to congestion in the Straits of Malacca. "Asean economies rely heavily on exports, which in turn depend on smooth imports. Rising freight rates and delays will increase trade costs, affecting everything from industrial production to consumer goods," Asrar said. He said that prolonged price shocks could lead to economic slowdowns across the region. "In import-dependent Asean countries, sustained inflation will reduce consumer spending and deter business investment. "If the crisis persists, the long-term effects on consumer prices could be severe." With many Asean nations still lagging in energy transition efforts, Asrar said diversifying supply chains would be difficult. "Asean may have to invest more aggressively in renewable energy and explore alternative trade routes. "There also needs to be a shift from a consumption-based to a production-based mindset to ensure long-term energy and economic security," he said.
New Straits Times
2 hours ago
- New Straits Times
Forex, stocks lower after US attacks on Iran boost uncertainty, oil supply risks
NEW YORK: Emerging market stocks and currencies were trading near a two-week low on Monday, after US attacks on Iran intensified geopolitical uncertainty and dampened risk appetite. The US attacked nuclear sites in Iran over the weekend, drawing retaliatory threats from Iran. Stock markets across the Middle East were mixed, with Israeli stocks down 0.7 per cent, still hovering around record highs. The index was set to snap a six-session winning streak. Stocks in Turkey lost 0.6 per cent, while in Saudi Arabia , they were were one per cent higher. International bonds in Israel were slightly higher to the dollar, while ones in Saudi Arabia were marginally lower. Turkey's lira was at its lowest since March 19, set for its third session of declines. Israel's shekel strengthened 0.4 per cent. Investors looked to dump risk assets amid the elevated uncertainty and favoured the US dollar, which was up 0.3 per cent, pressuring most emerging market currencies. A report said Iran's parliament had approved closing the Strait of Hormuz, an important corridor for oil transportation, but the closure awaits approval from the top security body. "Closing the Strait is the last option that Iran would resort to as it would certainly provoke a strong US military response, and also because its domestic economy relies on it," said Minna Kuusisto, chief analyst at Danske Bank. Investors have been worried about the impact of a potential Hormuz closure on oil prices, which soared to a five-month high on Monday, and its impact on inflation. Analysts at Sydbank estimated that a closure of the Strait of Hormuz would be the biggest shock to energy markets in more than 50 years and would significantly increase the headwinds in the financial markets. In emerging Europe, most currencies were lower against the euro. The Hungarian forint and the Polish zloty were down 0.3 per cent each. Regional bourses also slipped, in line with global stocks, with those in Poland and Romania losing 0.9 per cent and 0.7 per cent respectively. South Africa's rand depreciated 0.3 per cent against the greenback, while stocks gained 0.5 per cent. Tech firm Naspers contributed with a 2.5 per cent gain after posting a 59.4 per cent jump in its full-year core headline earnings. MSCI's index tracking global EM equities was down 0.7 per cent, as heavyweight Asian stocks lost ground, while the currencies index was down 0.4 per cent. Elsewhere, Thailand's baht was down about 0.8 per cent. Prime Minister Paetongtarn Shinawatra said on Sunday that all coalition partners had pledged support for her government, days after facing calls to step down.
The Star
2 hours ago
- The Star
Oil prices stable as investors await Iranian response to US strikes
LONDON (Reuters): Oil prices jumped on Monday to their highest since January as the United States' weekend move to join Israel in attacking Iran's nuclear facilities stoked supply concerns. Brent crude futures were up just 8 cents to $77.09 a barrel as of 0904 GMT. U.S. West Texas Intermediate crude rose by 3 cents to $73.87. Price volatility continued in Monday's session. Both contracts touched fresh five-month highs earlier in the session of $81.40 and $78.40 respectively, before giving up their gains and even turning negative during the European morning session. Brent has risen around 11% since the conflict began on June 13, while WTI has gained approximately 9%. Prices flattened out on Monday as investors weighed the geopolitical risk premium in oil markets without any impact on supply yet from the Middle Eastern crisis. "The geopolitical risk premium is fading, as so far there has been no supply disruptions. But as it's unclear how the conflict might evolve, market participants are likely to maintain a risk premium for now. So prices are set to stay volatile in the near term," UBS analyst Giovanni Staunovo said. Prices rose at the open after U.S. President Donald Trump said he had "obliterated" Iran's main nuclear sites in strikes over the weekend, joining an Israeli assault in an escalation of conflict in the Middle East as Tehran vowed to defend itself. Iran is OPEC's third-largest crude producer. Iran said on Monday that the U.S. attack on its nuclear sites expanded the range of legitimate targets for its armed forces and called U.S. President Donald Trump a "gambler" for joining Israel's military campaign against the Islamic Republic. The geopolitical risk premium includes fears that an Iranian retaliation may include a closure of the Strait of Hormuz, through which roughly a fifth of global crude supply flows. "All eyes remain on the Strait of Hormuz ... and whether Iran will seek to disrupt tanker traffic," Saxo Bank analyst Ole Hansen said. Prices could spike in the short term even without full-scale disruption, if the threat of interference alone is enough to delay shipments through the Strait, Hansen added. Goldman Sachs said in a Sunday report that Brent could briefly peak at $110 per barrel if oil flows through the critical waterway were halved for a month, and remain down by 10% for the following 11 months. The bank still assumed no significant disruption to oil and natural gas supply, citing global incentives to try to prevent a sustained and very large disruption. Given the Strait of Hormuz is indispensable for Iran's own oil exports, which are a vital source of its national revenues, a sustained closure would inflict severe economic damage on Iran itself, making it a double-edged sword, said Sugandha Sachdeva, from research firm SS WealthStreet. (Reporting by Robert Harvey in London, Mohi Narayan in New Delhi, Siyi Liu in Singapore; Editing by Christopher Cushing, Kate Mayberry and David Evans) - Reuters
