Oil prices soar and stock prices fall as US-Israel war with Iran rattles markets

BANGKOK– U.S. and Israeli attacks on Iran shook global markets Monday, with U.S. futures falling more than 1% and oil prices soaring, although gains by defense contractors and oil companies helped limit losses in Asian trade.

The future of the S&The P 500 and the Dow Jones Industrial Average fell 1.7%.

The price of the American benchmark barrel jumped 9% to 73 dollars per barrel. Brent crude jumped nearly 10% to nearly $80 a barrel.

European markets opened sharply lower. Germany’s DAX fell 2.2% to 24,737.47, while in Paris the CAC 40 lost 1.9% to 8,413.91. Britain’s FTSE 100 index slipped 1% to 10,800.63.

Stocks fell in most Asian markets, but rose in Shanghai, where rising oil prices boosted some shares of oil companies such as CNOOC and China Petroleum. & Chemical and PetroChina up to the 10% limit.

The Shanghai Composite index rose 0.5% to 4,182.59, while in Hong Kong the Hang Seng lost 2.1% to 26,059.85.

Japan’s Nikkei 225 index initially fell more than 2%. It closed down 1.4% at 58,057.24. Offsetting other losses, shares of defense-related stocks including Mitsubishi Heavy Industries and IHI Corp. rose.

Australia S&The P/ASX 200 finished flat at 9,200.90.

In India, which could face disruptions in its access to oil due to hostilities, the Sensex fell 2.1%.

Taiwan’s benchmark index lost 0.9% and Singapore’s lost 2.3%. In Bangkok, a major tourist destination in the Middle East, the SET fell 3.1%.

Markets were closed in South Korea for a public holiday.

The price of gold, which is generally considered a safe haven for investments during uncertain times, rose 3.4% to around $5,426 an ounce.

The U.S. dollar also appreciated, from 156.27 Japanese yen to 157.20 yen Friday evening. The euro rose from $1.1762 to $1.1708.

Traders are betting that the war will disrupt oil supplies from Iran and elsewhere in the Middle East. Attacks across the region, including on two ships passing through the Strait of Hormuz, the narrow mouth of the Persian Gulf, have limited oil exports to the rest of the world.

“About a fifth of global oil and LNG (liquefied natural gas) flows pass through the Strait of Hormuz. This is not an obscure channel. It is the aorta of the global energy system,” Stephen Innes of SPI Asset Management said in a commentary.

A prolonged war would likely lead to higher prices for other fuels and gasoline and could ripple through the entire global economy, increasing overall production costs.

Prolonged interruptions in oil flows across the Middle East would have “huge implications for oil, LNG and all markets around the world if it happens. Energy is an input to ALL production”, RaboResearch Global Economics & Markets said in a report.

Iran exports around 1.6 million barrels of oil per day, mainly to China. It may have to look elsewhere for supplies if Iranian exports are disrupted, another factor that could increase energy prices.

The size of China’s strategic oil reserves is a state secret. But a recent report by John Kemp of Base Research estimates them at between 1.1 and 1.2 billion barrels, the equivalent of about 100 days or just over three months of imports.

The war’s impact on markets was somewhat muted because the attacks were anticipated, with a massive buildup of U.S. forces in the Middle East. Traders therefore adjusted their positions to take this risk into account.

The conflict has, for now, distracted attention from the artificial intelligence issues that have dominated markets in recent months.

Friday, the S&The P 500 fell 0.4% to complete only its second losing month in the last 10 months. The Dow industrials fell 1.1% and the Nasdaq composite fell 0.9%.

Treasury yields fell in the bond market as investors looked for safer places to put their money.

“When markets are fragile, they don’t need a knockout blow. They just need another weight on the bar,” Innes said.

A report released Friday showing that U.S. wholesale-level inflation was 2.9% last month also hurt the broader market, far higher than the 1.6% economists had expected.

This could push the Federal Reserve to delay its interest rate cut for longer. Lower interest rates would boost the economy and investment prices, but they risk worsening inflation.