Oil prices jumped sharply on Thursday after US President Donald Trump vowed in a televised speech to hit Iran “extremely hard” over the coming weeks, dashing hopes of a near-term end to the conflict in the Middle East. Brent crude rose as much as 8% to $109.74 a barrel, reversing Wednesday’s drop when expectations of de-escalation had pushed the benchmark below $100.
European stock markets declined, with Germany’s Dax falling nearly 1%, while France’s Cac 40 and Italy’s FTSE Mib both dropped 0.2%. The FTSE 100 in London initially fell about 0.5% but later reversed losses to close up 0.7%, its highest since early March, boosted by gains in oil majors BP and Shell, which each rose about 3%. In Asia, Japan’s Nikkei fell 2.4%, China’s CSI 300 dropped 1.36%, and South Korea’s Kospi tumbled 4.8%.
Government borrowing costs rose, with the yield on 10-year UK gilts up four basis points to 4.886% and the two-year yield up six basis points to 4.36%, reflecting fears of higher inflation from increased energy costs. The US dollar gained 0.6% against a basket of major currencies as investors sought safe havens, pushing the pound down nearly a cent to $1.321.
Chris Beauchamp, chief market analyst at IG, said Trump’s speech failed to provide any guidance on ending the conflict, leaving markets to price in prolonged oil supply disruptions. “Instead of ‘no more war’, we got ‘no, more war!’, with heavier strikes expected … markets are back to pricing in economic catastrophe,” he said.
The impact is already being felt by consumers. The Bank of England warned on Wednesday that 1.3 million more UK homeowners could see mortgage payments rise due to the Iran conflict. Meanwhile, the RAC reported that petrol and diesel prices jumped by a record 20p per litre in March, the biggest monthly increase since Russia’s invasion of Ukraine in 2022.
