Oil prices surged past $100 a barrel on Monday morning, reaching a four-year high, before settling back to $85 a barrel by the close of US stock markets. The volatility came after a weekend of escalating violence in the Middle East, with at least five energy sites in and around Tehran hit by airstrikes. The Strait of Hormuz, a critical trade artery, has been effectively closed for a week, raising concerns about a sustained supply crunch.
US stock markets closed on a high after President Donald Trump claimed the US-Israel war with Iran was 'very complete'. The Dow Jones Industrial Average jumped 230 points, while the S&P 500 and Nasdaq rose 0.83% and 1.38% respectively. Earlier in the day, Asian and European markets had been rattled by the oil price surge, with Japan's Nikkei 225 dropping 5% and South Korea's Kospi slumping 6.6%.
Brent crude, the international benchmark, climbed as high as $119.50 a barrel, a 29% increase, before falling back. The West Texas Intermediate (WTI) benchmark also dropped to $86 a barrel after rising to $103 earlier. The price narrowing followed reports that G7 finance ministers would discuss a possible joint release of petroleum from reserves to tackle the surge.
European stock markets fell, with the UK's FTSE 100 down 1%, Germany's Dax dropping 1.2%, and France's Cac 40 down 1.8%. The Stoxx Europe 600 fell 1.3%, erasing all gains for the year. In the Middle East, Bahrain's state oil company declared force majeure for its shipments after an Iranian attack set its refinery ablaze, adding further instability.
President Trump described the oil price surge as 'a very small price to pay' for safety and peace, claiming prices would drop rapidly once the destruction of Iran's nuclear threat was over. However, Iran's Revolutionary Guard Corps warned that prices could exceed $200 per barrel if the conflict continued. Analysts noted that a deficit of 20 million barrels per day is hitting global oil balances with no sign of relief.
