Stock markets plunge after Trump’s ultimatum on Iran | Stock markets
Global stock markets fell sharply on Monday after Donald Trump threatened to “destroy” Iranian power plants unless the Strait of Hormuz is opened.
Stock markets in Asia and Europe collapsed at the start of the week. Japan’s Nikkei stock index fell 3.4%, China’s CSI 300 fell 2.8% and South Korea’s Kospi fell 6.5%.
In Europe, the Spanish Ibex fell 1.9%, the French CAC 40 index fell 1.5%, the German Dax fell 1.9% and the FTSE 100 fell almost 1.5%.
The US president said on Saturday he was giving Iran 48 hours – until shortly before midnight GMT on Monday – to open the strait, which carries around a fifth of the world’s oil and liquefied natural gas reserves.
Tehran said it would “irreversibly destroy” critical infrastructure across the Middle East, including vital water systems, if the United States carried out Trump’s threat.
The Iranian attacks effectively closed the strait, triggering a global energy crisis that International Energy Agency chief Fatih Birol says is equivalent to the combined force of the twin oil shocks of the 1970s and the fallout from Russia’s invasion of Ukraine.
The global economy is now bracing for higher oil prices due to cross-Strait disruptions, with Goldman Sachs forecasting that Brent crude, the international benchmark, will average $85 a barrel this year, up from $77 a barrel previously forecast. On Monday, oil rose 1.2% to $113.34 a barrel, still below the record high of $199 a barrel recorded earlier this month.
Gas prices in the UK rose 3.1% to 155p a month, almost double their levels before the Iran conflict.
Soaring energy prices have spooked investors, with the price of gold also falling on Monday. Its spot price fell 5.8% to $4,226.16 an ounce, as the prospect of higher inflation fueled expectations of interest rate hikes. Gold becomes relatively less attractive when interest rates are high, as the metal does not earn a return.
Keir Starmer will hold an emergency Cobra meeting with his top ministers and Bank of England Governor Andrew Bailey on Monday where they will discuss the economic impact of the Iran crisis. They will also discuss energy security, supply chain resilience and the international response to the war, Treasury said in a statement.
The conflict in Iran is increasing pressure on Starmer to announce a support package to help people meet their energy bills, which are expected to rise by 20% when the gas and electricity price cap expires at the end of June.
Investors will be watching the bond market closely on Monday, after the 10-year yield – the benchmark for UK borrowing costs – rose to 5% last week, the first time since the 2008 financial crisis. The rise in yield came after the Bank’s rate-setting committee voted on Thursday to keep interest rates unchanged at 3.75%.
The U.S. dollar, which is normally considered a safe haven in times of volatility, rose slightly on Monday. The dollar index, which measures the greenback against a basket of major currencies, rose 0.2%.
