Oil worth spikes and shares tumble as Iran launches missile strike
Oil prices jumped and stocks tumbled on Tuesday after Iran fired an estimated 180 missiles at Israel in retaliation for the ground invasion of southern Lebanon.
Brent crude jumped by as much as 4pc to above $74 a barrel following a warning from White House officials that a strike was imminent.
It rose further, topping $75 a barrel, after Tehran launched a volley of missiles at Israel shortly before 6pm London time.
Elsewhere, global stocks tumbled and the price of gold spiked on concerns about wider escalation in the region.
The pan-European Stoxx 600 index closed down 0.4pc, while the S&P 500 dropped 0.9pc on Wall Street.
Gold jumped by as much as 1.3pc to $2,673 per troy ounce, near its record high. The Israeli Shekel fell 1.1pc against the dollar.
The FTSE 100 was one of the few global stock indexes to register gains, buoyed by defence and oil stocks. BAE Systems, BP and Shell were all among the day’s biggest gainers.
Analysts said the moves were driven by concerns about escalation in the Middle East.
David Oxley at Capital Economics said: “Much remains uncertain. A significant escalation by Iran risks bringing the US into the war, which Tehran will presumably seek to avoid.
“Assuming this is avoided, the impact on oil prices will remain the key channel of transmission to the global economy.
“Iran accounts for about 4pc of global oil output, but an important consideration will be whether Saudi Arabia increases production if Iranian supplies are disrupted.”
Earlier in the day, oil prices had slid below $70 a barrel as traders reacted to Libya’s appointment of a new central bank governor, a key step to resolving a dispute between the country’s rival administrations that should allow oil output to resume.
The initial dip came despite Israel’s decision to launch a ground invasion of Lebanon through what the IDF called “limited, targeted” raids overnight.
Goldman Sachs initially said traders believed there was a “limited” risk of oil prices being pushed higher by the conflict, as markets expected higher supplies from both Libya and the Opec cartel. The Wall Street bank warned the price of crude could even fall as low as $60 a barrel by the end of next year.
However, a warning from Washington that Iran was preparing to launch an “imminent” ballistic missile attack on Israel sent immediate shockwaves through the market and sent the price of spiking.
Ashley Kelty, a senior oil and gas analyst at investment banks Panmure Liberum, said: “Biden has turned a blind eye to Iran increasing oil output by 800,000 barrels a day – a clear breach of sanctions – as he wants to keep the price at the petrol pumps low. It’s a key trigger for US voters.
“If Iran responds then the US will have to act and enforce these and possibly enforce further sanctions.
“Prior responses have been muted as there hasn’t been any disruption impact on supply. If this changes then things could rise very quickly.”
Mr Kelty was speaking before Tehran launched a volley of missiles at Israel. The strike raised concerns about a spiralling conflict in the Middle East, which could disrupt the supply of fuel from the region.
Yemen’s Iranian-backed Houthi rebels continue to target ships in the region, including oil tankers.
Two vessels sustained damage on Tuesday after being hit with missiles and a sea drone off Yemen’s Red Sea port of Hodeidah, maritime security agencies and sources monitoring the area said.
Yemen’s Iran-aligned Houthi militants later claimed responsibility for the attack on one of the ships, the Cordelia Moon, saying that it was struck with eight ballistic and winged missiles, a drone and an uncrewed surface boat.
The Yemeni Armed Forces claimed it was “triumphing for the oppression against the Palestinian and Lebanese peoples… and in retaliation to the American-British aggression against our country”.
In Britain, Edmund King, AA president, urged the Government not to raise fuel duty at the upcoming Budget, arguing there was “too much geo-political global uncertainty”.
Sir Keir Starmer opened the door to a rise in fuel duty over summer, a move that would reverse a 14-year freeze under the Conservatives.
Mr King said: “We are stressing to Government that any hike in fuel duty at the October 30th Budget could backfire if oil begins to increase and then drivers and industry would face a double hit. Increased fuel duty could be a catalyst for fuelling inflation which is the last thing industry, and consumers, need at the moment.”
Read the latest updates below.
