Global oil prices have risen sharply after Iran’s response to the bid for regime change by the US and Israel disrupted shipping, raising the prospect of a new energy-led surge in inflation.
Early trading in Asia, the first main financial market activity since Saturday morning’s airstrikes on Iran, saw the international benchmark Brent crude climb 13% to $82 a barrel – its highest level since July 2024.
It followed a jittery session for oil contracts on Friday when a 1% rise was explained by growing fears that US-Iran peace talks were off track, leaving Brent 8% higher through February.
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The implications of an extended spike in oil prices
For the UK, the rise in oil costs threatens not only notable hikes at the fuel pumps later this month but also a wider lift in costs across the economy at a time when inflation had been forecast to ease sharply, largely on the back of lower energy prices – natural gas.
Last week, the vast majority of financial market participants had expected the Bank of England to cut interest rates at its next rate-setting meeting in just over two weeks’ time. That level of confidence may now be in jeopardy given the wealth of uncertainties now pressing on the price outlook due to the war.
Market commentators, however, suggested Monday’s oil price spike was likely limited by the fact that some members of the OPEC+ group of oil-producing nations, controlled by Saudi Arabia, had responded to the conflict by pledging a rise in production from next month.
It is not only oil…
Iran’s response to Saturday’s strikes has seen Gulf states targeted and nearby shipping run for cover. At least three tankers had been damaged by missile and drone strikes, according to news agency reports in the region.
The regime has not…
