The Iran conflict has driven oil prices past $90 a barrel, marking the highest weekly gains since the Covid-19 pandemic six years ago and threatening a fresh rise in global inflation. Reports that Kuwait had begun cutting production after running out of storage space pushed Brent crude to $91.89 on Friday, its highest since April 2024 and up from about $72.50 just before the war broke out.
The price of the international benchmark has surged by more than 25% since the US-Israel attack on Iran last weekend, its biggest weekly jump since April 2020. Fears are growing over a broader storage crisis in the Middle East that could force the world's biggest oil producers to halt extraction. Holding facilities in Saudi Arabia and the United Arab Emirates could reach their limit within 20 days, according to consultants at Kpler, potentially forcing further shutdowns.
Concerns have been compounded by Qatar's energy minister, Saad al-Kaabi, who predicted that if the war continued unabated, all Gulf energy exporters would shut down production within weeks and oil would rise to $150 a barrel. He told the Financial Times that even if the war ended immediately, it would take weeks to months for Qatar to resume its liquefied natural gas exports after an Iranian drone strike damaged a terminal. Qatar accounts for about 20% of global LNG exports.
Britain relies on Qatar for only about 2% of its total gas supplies, but prices on the UK gas market surged to three-year highs this week amid fears that Europe may need to pay a premium to compete with Asian buyers for gas cargoes. Iran's Islamic Revolutionary Guard Corps have threatened to attack any western tanker attempting to pass through the Strait of Hormuz, a vital trade route for about a fifth of the world's oil and LNG. At least nine vessels have been attacked in the Gulf since the strikes began.
The gas market highs have fuelled inflation fears, putting UK government bond yields on course for their biggest one-week jump since Liz Truss's mini-budget in September 2022. Hopes of a UK interest rate cut this month have waned, with money markets now seeing only a 15% chance, down from 80% last week. Eurozone bond yields also rose, with markets almost fully pricing in a rate rise from the European Central Bank by year-end.
Stock markets in Asia-Pacific countries had their worst week since the start of the pandemic, while the FTSE 100 fell by more than 5%, its worst week since April 2025. Airline stocks were hit hard, with IAG, parent of British Airways, falling by more than 12%, and Wizz Air losing about a fifth of its value after issuing a profits warning. The US dollar strengthened, while gold fell by about 3.5% to below $5,100 an ounce.
