Oil prices rose and the U.S. dollar strengthened on Monday following American airstrikes on Iranian nuclear facilities over the weekend, sparking renewed geopolitical uncertainty in the Middle East.
Asian markets closed mostly lower, with the exception of gains in China, as traders awaited Tehran’s potential response. One looming concern is the possibility of Iran attempting to disrupt global oil flows by shutting the Strait of Hormuz — a strategic chokepoint that handles roughly one-fifth of the world’s oil supply.
Iran, the world’s ninth-largest oil producer, pumps around 3.3 million barrels per day, exporting just under half while consuming the rest domestically.
At the opening of trading on Monday, both Brent crude and West Texas Intermediate (WTI) jumped more than four percent to their highest levels since January. However, those gains eased by mid-afternoon in Asia, with both benchmarks up about 1.1 percent.
“Satellite images reportedly show that oil is still flowing through the Strait, which may explain the relatively muted market reaction,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Many investors are hopeful Iran will avoid full-scale retaliation to protect its own oil infrastructure and avoid a broader conflict that could jeopardize relations with China, its largest oil customer.”
Still, she warned, “if the situation deteriorates further, U.S. crude prices could surge past $100 per barrel.” As of Monday, WTI hovered around $75 per barrel.
Analysts at MUFG Bank warned that an oil shock would significantly harm most Asian economies, many of which are heavily dependent on energy imports.
Markets reflected the uncertainty. Tokyo’s Nikkei closed down 0.1 percent, Seoul slipped 0.2 percent, Sydney lost 0.4 percent, and Jakarta tumbled 1.7 percent. In contrast, Hong Kong gained 0.6 percent, and Shanghai’s composite index closed 0.7 percent higher. European markets opened on a softer note, with London, Frankfurt, and Paris all slightly lower.
The dollar strengthened against other major currencies, though analysts cautioned that the rally might not last.
“If this dollar bounce is merely a knee-jerk reaction to what markets view as short-term U.S. involvement in the Middle East, its recent downward trend could soon resume,” said Sebastian Boyd, strategist at Bloomberg.
Chris Weston of Pepperstone added that Iran may not need to take the drastic step of closing the Strait to create disruption. “By simply planting the idea of a possible disruption, shipping costs could spike, tightening global crude and gas supplies through indirect economic pressure.”
He also noted that while the immediate focus is on the Middle East, headlines related to U.S. trade negotiations could soon add to market anxieties.
Key Figures (as of 0700 GMT):
Brent Crude: +1.1% at $78.08 per barrel
WTI: +1.1% at $74.89 per barrel
Nikkei 225 (Tokyo): -0.1% at 38,354.09
Hang Seng Index (Hong Kong): +0.6% at 23,661.88
Shanghai Composite: +0.7% at 3,381.58
FTSE 100 (London): -0.3% at 8,743.99
Euro/USD: $1.1512 (down from $1.1516)
Pound/USD: $1.3445 (up from $1.3444)
Dollar/Yen: ¥147.14 (up from ¥146.13)
Euro/Pound: 85.62 pence (down from 85.66)
Dow Jones (New York): +0.1% at 42,206.82 (previous close)
AFP
