Oil prices surged and the US Dollar jumped as safe haven demand continued to ratchet up. Brent crude jumping approximately 10% to $79.90 and US crude climbing over 8% to $72.64.
Market participants simultaneously sought refuge in safe-haven assets, driving gold prices up 2.6% to $5,413 an ounce. A primary focus of concern remains the Strait of Hormuz, a critical artery for 20% of the world’s seaborne oil and liquefied natural gas.
Although the waterway remains open, marine tracking data reveals a growing bottleneck of tankers as operators weigh the risks of attack and rising insurance hurdles. This prolonged price surge threatens to reignite global inflation while acting as a functional tax on consumers and businesses.
The volatility triggered a widespread retreat in global equities. European and Asian markets saw significant losses, with banking and airline sectors hit particularly hard due to fears of stifled economic growth and rising fuel costs.
Europe’s broad STOXX 600 slid 1.7%, after Asia Pacific ex Japan shares had fallen 1.8% and the US S&P 500 futures were down 1.5%.
Conversely, energy and defense stocks surged to record highs, with giants like BP and Shell gaining nearly 6%.
In the Middle East, “exceptional circumstances” led the UAE and Kuwait to temporarily suspend trading on their stock exchanges. While most global indices tumbled, Chinese blue-chips managed a modest gain, despite the country’s heavy reliance on Middle Eastern oil imports.
European natural gas futures surged more than 22% to above €39/MWh on Monday, nearing their June highs. A sustained disruption in the Middle East would likely ripple across the globe, significantly impacting Asian buyers and driving a surge in demand for US liquefied natural gas (LNG).
This shift would further constrain the global gas market, creating a challenging spillover effect for Europe. These risks are particularly acute because European Union gas storage levels are currently sitting below 31%, a notable decline from the 40% levels recorded during the same period last year leaving the region with a thinner buffer against supply shocks.
