Oil prices rise and BP and Shell shares spike as conflict between Iran and US escalates
Oil prices are rising amid a sharp escalation of the conflict between Iran and the US since Friday night.
Shares in businesses such as BP and Shell are also benefiting from the concerted move higher.
A fresh wave of US strikes was launched over the weekend after an Iranian attack on a container ship in the Strait of Hormuz that set it ablaze and left a crew member missing.
US president Donald Trump has insisted the Strait of Hormuz remains open, while Tehran says it is closed.
No commercial vessels have crossed the Strait of Hormuz while broadcasting their location since yesterday evening, according to ship-tracking website MarineTraffic, but some may have crossed with their transmitters turned off.
‘A return to full-scale hostilities would have catastrophic consequences,’ United Nations Secretary-General António Guterres said in a statement.
Amid escalations in the conflict over the past few days, oil prices are rising again, sparking fears of higher prices at the pumps again for Britons.
Escalating: Iranian drone and missile sites destroyed by US strikes to secure Strait of Hormuz
Iran’s grip on the strait led to a global energy crisis, but oil prices have dropped sharply since wartime highs of $120 a barrel.
Brent crude rose up 4.5 per cent in London trading this morning to $79.51 a barrel, before easing to $76.60.
Futures for the Nasdaq 100 and S&P 500 fell 1.2 per cent and 0.5 per cent, respectively. The dollar strengthened 0.2 per cent against a basket of key trading partners.
Neil Wilson, Saxo UK investor strategist, said: ‘While a return to a full-blown military conflict seems unlikely, these tit-for-tat exchanges mean it’s higher for longer, even if we are not back to the kind of peaks we saw earlier in the year.’
Dan Coatsworth, head of markets at investing platform AJ Bell, said: ‘This upwards shift in crude reflects concern about the fate of the fragile truce between Washington and Tehran after renewed strikes over the weekend.’
BP and Shell shares benefit
Shares in oil giant BP rose 2.11 per cent or 10.20p to 492.85p on Monday morning, having climbed more than 24 per cent in the past year.
Shell shares were up 0.89 per cent or 27.00p to 3,065.50p, having risen by 16 per cent in the past year.
The FTSE 100 was up 0.17 per cent or 18.03 points, having risen 16 per cent in the last 12 months.
Coatsworth said: ‘Global stocks may be falling off the back of renewed tensions between the US and Iran, but the FTSE 100 is an exception thanks to its chunky energy sector exposure.’
Saxo’s Wilson added: ‘European stock markets slipped in early trade Monday but the FTSE 100 is holding water thanks to Shell and BP gaining with oil prices, while housebuilders have bounced a bit after a very tough period.
‘US futures are lower after Wall Street closed higher on Friday. Gold is lower and the US dollar is firmer.’
US stock futures fell today, with the contract for the S&P 500 down 0.4 per cent and that for the Dow nearly unchanged. The Nasdaq composite future lost 1.2 per cent.
In Asian trading, Tokyo’s Nikkei 225 index lost 1.9 per cent to 67,242.73, while in Seoul, the Kospi fell 9 per cent to 6,806.93. It is now at its lowest level since April.
In currency markets, the US dollar strengthened 0.2 per cent against a basket of key trading partners.
Big business: Shell and BP shares are benefiting from the resurgence of higher oil prices
High bond yields have been weighing on financial markets worldwide since more expensive oil and high inflation could push the US Federal Reserve and other central banks to increase interest rates.
Energy prices on global wholesale markets have swung dramatically in recent months as traders reacted to developments in the conflict.
In the US this week, the Bureau of Labor Statistics is expected to report that consumer prices in the US fell in June from the previous month. It would be the first time in two years that prices fell month-over-month.
Almost all of that decline will be because gas and oil prices fell sharply last month when Trump signed a Memorandum of Understanding with Iran.
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