Oil prices resumed their upward trend on Friday as the International Energy Agency chief Fatih Birol warned that it could take up to six months to restore oil and gas flows from the Gulf, saying the world is facing what could be the most severe energy crisis in history.
“It will be six months for some (sites) to be operational, others much longer,” he said.
Birol, in a Financial Times interview, said politicians and markets were underestimating the scale of the disruption, with around one-fifth of global oil and gas supplies effectively stranded in the region.
Brent crude traded near $109 (€94) a barrel, up by about 6 per cent this week, after closing at the highest since mid-2022 on Thursday. Oil prices have swung on average by more than $10 a day since the war began, with open attacks on energy infrastructure heightening volatility.
Gas prices continued to be volatile, though not as extreme as those experienced on Thursday which saw surges to levels not seen in three years, while the European Central Bank said a prolonged disruption would push euro-zone inflation to 6.3 per cent and trigger a brief recession.
Already, the price hikes have added €7 billion ($8.1 billion) to Europe’s energy bills over the past two weeks, according to the European Commission, the EU’s executive arm.
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Equity markets turned choppy heading into the weekend, while oil prices cooled as investors weighed efforts by the US and Israel to ease concerns over the Iran war.
The Europe-wide Stoxx 600 index edged lower on Friday morning but recovered by lunchtime, as the markets pondered a European Central Bank (ECB) rate hike in the near future.
The ECB kept the policy rate unchanged on Thursday, but policymakers expect to discuss hikes in the coming months as the Iran war pushes up inflation in the euro zone.
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Among individual stocks, Unilever shares added 1.2 per cent after the consumer goods group confirmed it was in talks with US-based McCormick & Company about selling its food business.
US futures extended a drop on Friday as earlier hopes for a quick resolution to the war in the Middle East faded.
Israel launched fresh attacks on Iran a day after US President Donald Trump told it not to repeat its strikes on Iranian natural gas infrastructure.
Israel’s prime minister Benjamin Netanyahu said it would no longer target energy infrastructure, and added that the war will end a lot faster than people think, as Iran is no longer able to enrich uranium or manufacture ballistic missiles.
Meanwhile, Trump told reporters he’s “not putting troops anywhere” after being asked about the possibility of deploying ground troops.
Traders are parsing every geopolitical headline as the conflict has upended the energy supply chain.
“The long shadow of the energy crisis is far from lifted,” said Hebe Chen, a senior market analyst at Vantage Global Prime in Sydney. “It would be naive to call this anything more than a fragile exhale.”
Trading in Asia was thin on account of holidays in Indonesia, Malaysia and the Philippines. Japanese markets were also shut, meaning there was no cash trading in Treasuries during Asian hours.
The risk of a global inflation shock has also complicated the policy outlook for global central banks. Investors in bond markets around the world are rushing to bet on higher interest rates amid the jump in energy prices. -Bloomberg/Reuters