Brent crude oil prices surged past $97 a barrel on Monday after reports that Iran has halted peace talks with the United States, reigniting fears of supply disruptions. According to the IRGC-affiliated Tasnim news agency, Iran's negotiating team is pulling out of message exchanges through mediators with the US until Israel ends its operations in Lebanon and Gaza.
The spike in oil prices has deepened concerns over inflation and borrowing costs, contributing to a 0.6% drop in UK house prices in May, the first monthly decline this year, according to Nationwide. The average home price is now 1.7% higher than a year earlier, but rising mortgage rates are dampening buyer demand.
Analysts warn that oil could soon hit $100 a barrel if tensions escalate. Chris Beauchamp, chief market analyst at IG, said: 'The weekend’s exchange of projectiles has been followed up by signs that Iran’s stance is hardening. It is not hard to imagine both oil prices breaching $100 again, putting pressure on equity markets.'
The London stock market fell sharply, with housebuilders like Persimmon and Barratt Redrow dropping over 4% and 3% respectively, as higher inflation expectations weigh on the sector. Government bond yields also rose, with the UK 10-year yield climbing to 4.88%, up from 4.81% on Friday.
The dollar strengthened against the pound and euro as investors sought safe havens, pushing sterling down half a cent to $1.341 and the euro to $1.16. The crisis has also raised fears about the reopening of the Strait of Hormuz, a key oil transit chokepoint.
