Stocks in the U.K. and U.S. rose while Asian indexes tumbled Wednesday as oil and gas prices whipsawed on fears the U.S.-Israel conflict with Iran will drag on and keep choking traffic through the Strait of Hormuz, a vital energy artery.
- The FTSE 100 and major U.S. and European benchmarks rebounded after two days of declines; several Asian markets fell sharply for a third straight session.
- Brent crude is up about 12 percent since Saturday, when U.S. and Israeli forces began bombing Iran and Tehran retaliated with strikes on neighboring Arab countries.
- Benchmark U.K. gas has jumped more than 60 percent since the flare-up, settling Wednesday at 128 pence per therm, below Tuesday’s 170p intraday high.
- Shipping through the Strait of Hormuz — which handles roughly one-fifth of global oil and gas flows — has nearly halted amid Iranian threats, leaving about 200 tankers effectively stranded, according to Lloyd’s List Intelligence.
- Saudi Arabia reported a second attempted drone attack this week on its Ras Tanura oil refinery; QatarEnergy suspended production of liquefied natural gas.
- President Donald Trump said the U.S. would offer risk insurance “at a very reasonable price” and, if needed, use the Navy to protect tankers, but insurers and shippers remain wary.
- U.K. officials warned sustained energy spikes could lift inflation and complicate Bank of England rate-cut hopes.
- Advertisement -
Energy prices dipped intraday Wednesday but remain far above pre-attack levels as shippers, crews and insurers balk at transiting the narrow waterway between Iran and the United Arab Emirates. Premiums have surged, particularly for vessels deemed American, British or Israeli. Despite White House assurances, analysts said naval escorts and federal backstops may not reopen the choke point quickly.
“Shipping companies, insurers, crew members… are probably going to be reluctant,” said Lindsay James, investment strategist at wealth manager Quilter. “It’s not really feasible to think that is going to be the solution to reopening energy supplies. The solution is going to be a peace agreement, and it feels like we’re some way away from that.”
U.S. Treasury Secretary Scott Bessent said crude markets “are very well supplied,” an assessment echoed by some traders noting comfortable inventories outside the Gulf. But fresh security scares kept nerves taut. Saudi Arabia’s defense ministry said its Ras Tanura facility faced a second drone attempt this week, and state-run QatarEnergy halted LNG production, tightening a market critical to Europe and Asia.
Asia bore the brunt of the equity sell-off as the region imports vast amounts of Middle Eastern energy. Stocks in South Korea and Thailand plunged more than 8 percent at one point, triggering temporary trading halts designed to prevent panic selling. About 80 percent of Qatar’s LNG supplies go to Asian buyers, said James Hosie, oil and gas analyst at Shore Capital, forcing those consumers to bid up alternative cargoes and lifting global gas prices.
In the U.K., inflation worries resurfaced as energy costs climbed. David Miles, a committee member at the Office for Budget Responsibility, said that if oil and gas prices stay elevated, U.K. inflation will likely rise, though current increases are “nowhere near as large” as after Russia’s 2022 invasion of Ukraine. “If prices stayed where they were at the moment, probably we’re talking about an impact on the level of prices in the U.K. maybe of 1% or so,” he told the BBC.
Investors pared back expectations for rate cuts from the Bank of England this year. Quilter’s James said the market is starting to price in stickier inflation that could remove one anticipated reduction. The National Institute of Economic and Social Research warned that persistent energy pressures could even push rates back above 4 percent. Chancellor Rachel Reeves planned to meet North Sea energy bosses Wednesday to discuss supply risks and mitigation. The Bank of England announces its next policy decision on March 19.
With crude and gas steering sentiment, markets are likely to remain headline-driven. The depth and duration of the Hormuz disruption — and whether diplomatic channels can ease it — will determine whether this week’s price shock becomes a broader inflation setback.
By Ali Musa
Axadle Times international–Monitoring.
