Brent crude nears $115 after Iran attacks key Gulf energy facilities
Global energy prices soared on Thursday after Iran attacked two oil refineries in Kuwait and a key natural gas facility in Qatar that can supply a fifth of the world’s liquefied natural gas.
The attacks added to fears that the energy crisis caused by the closure of the Strait of Hormuz to oil tanker traffic could be longer and more extensive than feared, with lasting damage to oil and gas production.
Brent crude, the international benchmark, rose nearly 6% to $113.77 a barrel, up from less than $73 a barrel on the eve of the war. Benchmark U.S. crude oil was less affected by the latest attacks in the Middle East, rising less than 1% to $96.26 a barrel.
The TTF European benchmark for natural gas prices traded 17% higher on Thursday and has doubled in the last month.
The Iranian attack affected the Ras Laffan terminal for shipping liquefied natural gas to Qatar. Qatar typically supplies around 20% of global LNG consumption, which can be transported by ship. The facilities closed after a drone attack. The closure of the Strait of Hormuz to most tanker traffic also left the gasman with nowhere to go.
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If the disruptions caused by Iran’s attacks on the energy infrastructure of its Arab Gulf neighbors keep oil and gas prices high for long, they could create a wave of debilitating inflation for the global economy.
Markets on Wall Street fell before the opening bell. S&P 500 and Dow Jones Industrial Average futures each fell 0.1%, while Nasdaq futures fell 0.3%.
The Federal Reserve on Wednesday opted to leave its benchmark interest rate unchanged and projected only one cut more than a quarter point this year due to elevated inflation and uncertainty about the ramifications the Iran war will have on the global economy.
Gold and silver prices also fell, dragging major mining stocks down with them. Gold fell 4% to $4,697 an ounce, while silver fell 8.7% to $70.80. Most industrial metals also saw their prices fall.
Shares in miners Hecla and Newmont fell 7.8%, while Freeport-McMoRan fell 4.6%.
The European and Asian markets were being hit much harder than the US markets. Germany’s DAX lost 2.4% at midday, Paris’ CAC 40 fell 1.7% and Britain’s FTSE 100 lost 2.1%.
In Asian trading, Tokyo’s Nikkei 225 fell 3.4% to 53,372.53 as the Bank of Japan also opted to keep its benchmark interest rate at 0.75%, citing the war with Iran as a factor.
AP Photo/Ahn Young-joon
In its monetary policy statement, the BOJ said that “in the wake of rising tensions in the Middle East, global financial and capital markets have been volatile and crude oil prices have risen significantly; future developments deserve attention.”
Higher oil prices are a heavy burden on Japan, which, like South Korea and Taiwan, relies on imports of most raw materials for industries that rely heavily on oil and its derivatives.
Seoul’s Kospi lost 2.7% to 5,763.22.
In Hong Kong, the Hang Seng fell 2% to 25,500.58, while the Shanghai Composite Index lost 1.4% to 4,006.55.
Australia’s S&P/ASX 200 lost 1.7% to 8,497.80 and Taiwan’s Taiex fell 1.9%. In India, which has also suffered oil and gas supply disruptions, the Sensex lost 2.7%.
“The combination of higher oil, rising US yields and a stronger dollar is acting as a macroeconomic wrecking ball for Asian assets and currencies,” Stephen Innes of SPI Asset Management said in a note.
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Business writer Matt Ott reported from Washington; McHugh contributed from Frankfurt, Germany.