Global oil prices soar after Israel attacks Iran

Global oil prices surged sharply after Israel announced it had launched an attack on Iran, marking a significant escalation in tensions in the Middle East. The price of Brent crude, a global benchmark for oil, rose by more than 10% shortly after the news broke, reaching its highest level since January. This sudden increase reflects traders' fears that a conflict between Iran and Israel could disrupt the flow of oil from one of the world's most energy-rich regions. The cost of crude oil is crucial because it influences many everyday expenses, including the price of fuel for vehicles and the cost of food in supermarkets. Although oil prices eased slightly after the initial spike, Brent crude remained over 5% higher than the previous day's closing price, trading at approximately $74. 47 per barrel. Despite this recent rise, oil prices are still more than 10% lower than they were at the same time last year and remain well below the peaks seen in early 2022 following Russia's invasion of Ukraine, when prices soared above $100 a barrel.

The increase in oil prices also had a negative impact on stock markets around the world. Share prices fell across Asia and Europe, with Japan's Nikkei index closing down 0. 9% and the UK's FTSE 100 index dropping 0. 3% by midday. In the United States, major stock indices also opened lower, with the Dow Jones Industrial Average falling 1. 5% and the S&P 500 down 0. 8%. During times of uncertainty, investors often turn to so-called 'safe haven' assets like gold and the Swiss franc, which are seen as more stable investments. The price of gold rose by 1. 2% to $3,423. 30 an ounce, reaching its highest level in nearly two months.

The conflict escalated when the Israeli Defence Forces reported that Iran had launched around 100 drones towards Israel. Analysts are closely watching the situation, as the conflict could either be quickly resolved, as seen in previous clashes between the two countries, or it could escalate into a larger war that disrupts oil supplies from the Middle East. Experts at Capital Economics warned that if Iran's oil production and export facilities were targeted, Brent crude prices could jump to between $80 and $100 a barrel. However, they also noted that such a price spike would likely encourage other oil producers to increase their output, which would help limit the rise in prices and reduce the impact on inflation. A spokesman for the UK motoring organization RAC said it was too early to predict how the recent increase in oil prices would affect petrol prices, as this depends on how long wholesale fuel prices stay high and the profit margins retailers choose to apply. The Strait of Hormuz, a vital shipping route through which about a fifth of the world's oil passes, could be severely affected if Iran targets infrastructure or shipping in the area. This strait connects the Gulf with the Arabian Sea and is bordered by Iran to the north and Oman and the United Arab Emirates to the south. The situation remains volatile, and markets will be closely monitoring developments in the coming days.