Oil prices jumped more than 5% amid geopolitical tensions in the Strait of Hormuz and ongoing attacks on regional oil facilities, while global equities showed mixed reactions.
HONG KONG: Oil prices surged more than five percent as geopolitical tensions escalated around the key Strait of Hormuz. The spike followed a lukewarm response from US allies to former President Donald Trump’s call for help in securing the waterway.
Iran has effectively closed the strait and continues to target crude-producing neighbours. This prompted a sharp rebound in prices after Monday’s losses triggered by International Energy Agency (IEA) head Fatih Birol’s comments.
Birol had suggested member countries could unlock more oil from strategic stocks “if needed”. This came after a record release of 400 million barrels was agreed upon last week.
West Texas Intermediate and Brent crude each climbed more than five percent above $100 a barrel before easing slightly. The ongoing crisis showed no immediate signs of resolution.
Several nations distanced themselves from Trump’s appeal for a collective security effort. German Chancellor Friedrich Merz stated the conflict was “not a matter for NATO”.
Britain, Spain, Poland, Greece, and Sweden also opted not to join the initiative. Australia and Japan similarly declined to participate.
Trump warned that allied refusal to help would be “very bad for the future of NATO”. He also revealed he asked to delay a summit with Chinese leader Xi Jinping over the issue.
Attacks on Middle Eastern oil infrastructure continued unabated. Explosions were reported in Doha and an “unknown projectile” hit a tanker off Oman’s coast.
Israel launched a “wide-scale wave of strikes” in Tehran and attacked Hezbollah in Beirut. Drones also hit major oil fields in the United Arab Emirates and Iraq.
A drone and rocket attack targeted the US embassy in Baghdad early Tuesday. Despite the oil spike, most Asian equity markets extended gains from Monday.
Markets were buoyed by Nvidia’s forecast of at least $1 trillion in revenue through 2027. This provided investors some relief from the Middle East turmoil.
Seoul led gains, rising more than one percent. Taipei, Sydney, Singapore, Bangkok, Jakarta, and Manila also traded higher.
Tokyo and Shanghai dipped, while Mumbai was flat. The positive sentiment followed a strong close on Wall Street’s three main indexes.
Analyst Chris Weston from Pepperstone noted conviction behind a sustained rally “remains relatively low”. He warned it was difficult to view recent developments as a definitive de-escalation.
Traders found some cheer as a Pakistani oil tanker transited Hormuz with its transponder on. It was the first non-Iranian tanker to do so since the crisis began.
Australia’s central bank cited “sharply higher fuel prices” when it lifted borrowing costs. Investors are awaiting a slew of other central bank decisions this week.
Analysts suggest these decisions could see a resumption of interest rate hikes. The aim would be to offset potential inflation spikes caused by surging crude prices.
The Sun Malaysia
