Brent crude oil prices have climbed to their highest level since the US and Iran agreed a conditional ceasefire in early April, reaching $107.48 a barrel on Friday. The surge has prompted warnings from Wall Street that sustained high oil costs could tip the US economy into recession.
The price spike comes as the Strait of Hormuz remains largely blockaded, with oil production in the region more than halved since the conflict began. Before the war, Brent crude traded around $72 a barrel; it hit a peak of $119.50 in early March. Analysts at Forex.com noted that risks to oil prices remain tilted to the upside as the US-Iran stalemate drags on, with Tehran refusing to negotiate while the naval blockade persists.
US consumer confidence has already taken a hit, with the University of Michigan's sentiment index dropping 3.5 points to 49.8 in April, comparable to the trough seen in June 2022. Director Joanne Hsu attributed the decline to shocks from gasoline prices, stating that military developments not easing supply constraints are unlikely to buoy consumers.
In London, the FTSE 100 closed down 78 points (0.75%) at 10,379, with packaging firm Mondi falling 11% after warning that the Iran war was increasing its costs. Meanwhile, Bank of England deputy governor Sarah Breeden had earlier warned of a possible market correction.
The International Energy Agency's executive director, Fatih Birol, said the oil crisis has fundamentally altered the fossil fuel industry, driving countries towards renewables and nuclear power. He urged the UK to forgo much of its potential North Sea expansion, citing a loss of trust in fossil fuel reliability.
