The price of oil has been driven higher by the latest round of escalations in the Middle East, renewing fears of a drastic global energy shock.
Brent crude – the international benchmark for oil prices – jumped over six per cent on Monday morning to over $96.
It follows a weekend of tensions where shipping in the Strait of Hormuz has once again ground to a halt following a brief opening on Friday.
The regime in Tehran has warned that the new closure will remain in place until the US blockade is lifted.
In a Truth Social post on Sunday, Donald Trump said he was sending a new delegation to Pakistan for peace talks, which follows a previous 21-hour stint led by Vice President JD Vance, failing to broker an agreement.
But whilst a temporary ceasefire was reached in the last few weeks, no agreement has been formally sealed with the current suspension of hostilities set to expire on Wednesday.
“We’re offering a very fair and reasonable DEAL, and I hope they take it because, if they don’t, the United States is going to knock out every single Power Plant, and every single Bridge, in Iran,” Trump wrote on Truth Social.
“NO MORE MR. NICE GUY! They’ll come down fast, they’ll come down easy and, if they don’t take the DEAL, it will be my Honor to do what has to be done”.
Over 600 million oil barrels stranded in the Strait
Investor sentiment soured on the latest ramping up of tensions with global markets slipping – albeit modestly – into the red. The FTSE 100 was down 0.6 per cent at open to 10,601.52.
Losses were contained by a two per cent jump from energy giant Shell and three per cent from BP, which said last week it had an “exceptional” quarter in oil trading due to the volatility.
“The market reaction was pretty clear-cut but relatively muted – oil up, bond yields up, dollar catching some haven bid…broadly a reversal of the Friday relief rally,” Neil Wilson, UK investor strategist at Saxo Markets, said.
Tamas Varga, analyst at TP ICAP Group, said over 600 million barrels of oil are now estimated to be stranded behind the strait.
“This will do no favours for monetary policymakers, investors, or the average Joe, all of whom are already anxious about inflationary pressures and persistently elevated retail energy prices,” Varga added.
A fresh report from Item Club this morning projected inflation would reach near double the Bank of England’s two per cent target this year, in a major blow to hopes of interest rate cuts.
By CityAM