Oil rises on fresh Middle East fears after attack on US base

HONG KONG (AFP) – Oil rose yesterday on fresh Middle East fears as Joe Biden pledged to retaliate after blaming Iran-backed rebels for the killing of three US service members in a drone attack on a base in Jordan.

The attack – which came two days after Yemen’s Houthi rebels struck a vessel in the Red Sea – ramped up tensions in the region and stoked worries about supplies through the key trade waterway.

Both main crude contracts rose more than one percent in early trade – hitting levels not seen since November – before paring the gains slightly.

“The news of three US troops being killed by a drone attack, and President Biden saying ‘we shall respond,’will likely dial up the market’s focus on the region,” Andrew Ticehurst, at Nomura, said.

The news comes as Israel presses on with its war against Hamas, adding to investor concerns about a wider conflagration that brings in Iran and the United States.

Still, the reports did little to dent equity markets in Asia, with traders awaiting a crucial policy decision by the US Federal Reserve this week and the release of more corporate earnings.

Hong Kong led the way, piling on more than one percent as traders welcomed news that China would stop the lending of certain shares for short selling as officials try to put a floor under the country’s battered markets.

Willer Chen of Forsyth Barr Asia said that while the move would likely have a limited effect on stabilizing equities, it was “a good gesture as market participants had been calling for regulators to step in on this front”.

There was little immediate reaction from traders to news that a Hong Kong court had issued a winding-up order against Chinese developer Evergrande.

Evergrande’s Hong Kong-listed shares collapsed 20 percent on the news before they were suspended.

The decision came amid worries that a huge debt crisis in China’s property sector could spill over into the wider economy.

There were also gains in Shanghai, Tokyo, Sydney, Seoul, Singapore, Taipei, Jakarta and Wellington.

Asia’s upbeat start followed another record close for the Dow on Wall Street that came after the central bank’s preferred inflation gauge indicated prices were being brought under control.

As well as the Fed’s meeting, the week also sees a number of other notable events, including the release of figures on US jobs creation and consumer sentiment, and Chinese manufacturing activity.

Amazon, Microsoft and other large technology companies are also due to report their earnings.