Oil prices surge as US strike fuels fear of Middle East war
Concerns Iran could shut key Straits of Hormuz passage in reprisal for assassination of top general
PANICKING traders sent oil prices surging yesterday amid fears the US assassination of Iran’s top military commander will spark war in the Middle East.
Brent crude surged as much as 5pc after General Qassim Soleimani, head of Iran’s elite Quds Force, was killed in an air strike at Baghdad’s international airport.
It came as a senator close to President Donald Trump warned that Iranian refineries could be targeted next – a move that would spark chaos in the world’s most important region for oil exports.
Experts fear Iran may retaliate by blocking the vital Straits of Hormuz, cutting off a key artery in the Persian Gulf through which a fifth of the world’s oil supply is transported every day. Oil could be catapulted to $150 a barrel if there is a full-blown war.
As a string of major Western producers reportedly evacuated staff through Basra Airport in Iraq, Brent climbed to more than $69 a barrel before slipping back slightly to settle at $68.60.
Gold – a traditional safe haven for wealth in times of strife – neared a sixyear high, while the Swiss franc and Japanese yen both rallied as investors sought neutral countries.
The jump in crude prices represents their largest spike since an attack last year on plants in Saudi Arabia, which took down 5pc of global supply for days.
European stock markets were rattled throughout the day, with the Dax in Frankfurt the worst performer, closing 1.25pc down, while the Dow Jones in Wall Street opened sharply lower
$150 The price for a barrel of crude investors fear could be reached if conflict between Iran and the US becomes a full-blown war
before closing 0.8pc down. Shares in London-listed oil giants Shell and BP both rose yesterday, with BP the best performing stock on the FTSE 100, gaining 2.5pc. The pair will benefit from higher oil prices.
Meanwhile, airlines were hit hard by the likelihood of rising fuel costs, with easyjet dropping 3.4pc as the biggest faller on London’s main index. European rivals Lufthansa and Air France KLM were stung too, sinking 6.5pc and 7.9pc respectively. British Airways owner IAG dropped 1.8pc. Shares in BAE Systems, a major supplier of arms to Saudi Arabia, climbed 1.2pc. The rise in oil prices is expected to have consequences for drivers.
The RAC said the increase could add 2p a litre to petrol and diesel.
Luke Bosdet, of the AA, said: “Drivers in the UK need to brace themselves for a rise in the price of road fuel at the start of the new year.”
In the event of an outright conflict between Iran and the US, likely to embroil neighbouring producers such as Iraq and Saudi Arabia, Capital Economics said oil prices could skyrocket to $150 a barrel. Caroline Bain, its chief commodities economist, warned oil prices are likely to increase again next week.
Fearing Iranian reprisals, foreign oil companies were evacuating their American employees from Iraq yesterday. Exxonmobil said it was closely monitoring the situation, but declined to say whether it was pulling staff out.
A spokesman for Chevron said that staff safety was its top priority but declined to comment on specifics.
Experts say the risk of Iran blocking the Straits of Hormuz as a retaliatory measure had risen significantly.
Lindsey Graham, a Republican senator, warned on Twitter that if Iran “continues to attack America and our allies, they should pay the heaviest of prices, which includes the destruction of their oil refineries”.
“If Iranian aggression continues and I worked at an Iranian oil refinery, I would think about a new career,” he added.