Oil and gas prices soared while stocks plunged across Asia and Europe following US-Israeli strikes on Iran, which killed its supreme leader and disrupted a key global oil shipping route.

HONG KONG: Oil and gas prices surged while global stock markets tumbled on Monday after US-Israeli military strikes on Iran ignited fears of a protracted conflict in the crude-rich Middle East.

Brent crude oil briefly spiked almost 14% and West Texas Intermediate jumped nearly 12% at the start of trading following the attacks, which killed Iran’s Supreme Leader Ayatollah Ali Khamenei and other senior officials.

The bombings have effectively shut the vital Strait of Hormuz, through which around 20% of global seaborne oil passes, after several ships were attacked and heightened supply fears.

Equity markets across Asia sank, with Tokyo, Hong Kong, Singapore, Mumbai, Bangkok, Wellington and Taipei all deep in the red while US futures were down more than 1%.

London sank 1% at the open, while Frankfurt and Paris both shed more than 2% as European markets followed the negative regional lead.

Airline stocks took a severe battering as carriers were forced to cancel flights to the region, with Cathay Pacific sinking 4% in Hong Kong and Sydney-listed Qantas diving 5.4%.

Singapore Airlines dropped 4.8% while Japan’s ANA and JAL each fell more than 5% amid the widespread travel disruption.

Energy firms rallied strongly on the soaring crude prices, with Australia’s Woodside Energy and Santos each jumping more than 6% and PetroChina adding almost 4% in Hong Kong.

Japan’s Inpex climbed more than 6% as investors shifted into resource stocks, while gold, a traditional safe-haven asset, climbed 2% and the US dollar also strengthened.

Crude pared some of its early gains but still sat more than 9% higher, while European natural gas prices rocketed more than 20% on supply concerns.

Brent had already rallied last week on growing concerns that former US President Donald Trump would order an attack as talks aimed at curtailing Iran’s nuclear programme stalled.

Saxo Markets analyst Charu Chanana warned that persistent higher oil prices raise the risk of stickier headline inflation and could slow the pace of improvement in inflation prints.

Chanana noted that while this does not automatically mean policy tightening, it can make the US Federal Reserve more cautious about cutting interest rates quickly because energy-driven inflation can spill into expectations and broader pricing behaviour over time.

Trump urged Iranians to rise up against their government and said the war could last “four weeks,” while the powerful head of Iran’s Supreme National Security Council said the country “will not negotiate with the United States”.

Iran continued a retaliatory missile and drone campaign in the Gulf, adding to fears the conflict could spread after Tel Aviv launched attacks on Lebanon following rocket fire from Tehran-backed militant group Hezbollah.

While Iran has not officially closed the Strait of Hormuz, its Revolutionary Guards have warned against transiting the waterway, and at least two ships were struck on Sunday according to the British maritime security agency UKMTO.

Iranian state television said an oil tanker was hit and was sinking after trying to “illegally” pass through the strait, a situation which analysts say makes insurance costs prohibitive.

Amena Bakr, head of Middle East and OPEC+ research at Kpler, predicted crude could hit USD 90 per barrel, noting that the main shipping companies have already confirmed they are suspending passage of their fleets through the strait.

Bakr warned that if the blockade of the Strait of Hormuz continues, “no matter how much spare capacity (in the strategic reserves) is not going to fill that gap,” adding that “that gap is just too big”.

Another Kpler analyst, Michelle Brouhard, described high oil prices as “the Achilles heel of Trump,” suggesting Iran was likely to look to keep crude prices high to force a political backdown as the United States approaches mid-term elections.

Gas prices also soared sharply, dealing another potential blow to the world economy as Qatar is a key exporter of liquefied natural gas, which heightens global inflationary risks.

Economist Eric Dor from the IESEG School of Management in Paris said rising energy prices, increased shipping costs and loss of revenue for air transport could have “a harmful effect on growth”.

Dor told AFP that “if it’s a matter of three days, it’s not serious, but if it’s over a longer period, then it will have an additional recessionary effect” on the global economy.

 The Sun Malaysia