Bond yields spiked, oil and gas prices rallied and the FTSE 100 sank to its lowest level since the start of the year as reciprocal military strikes on energy \u00adinterests across the Middle East raised the prospect of a \u201cdoomsday scenario\u201d for global energy markets.<\/p>\n
Heightened anxiety over the possibility that a protracted energy shock could stoke inflation led central banks in Britain, the United States, Canada, Europe and Japan to put interest rate-cutting cycles on hold.<\/p>\n
The Bank of England\u2019s monetary policy committee<\/a> voted 9-0 in favour of keeping the borrowing rate at 3.75 per cent, the first time it had acted unanimously since 2021, and warned that \u201cenergy supply would take time to \u00adrecover even if the conflict abated\u201d.<\/p>\n Andrew Bailey<\/a>, the Bank\u2019s governor, said: \u201cNone of us know how this is going to play out.\u201d He later told LBC \u201cthe longer it goes on \u2026 the effect will be larger\u201d, adding that reopening the Strait of Hormuz shipping route was \u201cthe best thing to do to get the energy market back on its normal footing\u201d.<\/p>\n As the conflict in the Gulf escalated on its 20th day:<\/p>\n The yield on two-year gilts, which influence the cost of UK government borrowing, rose at the fastest rate in two years<\/a>. Five-year gilts also suffered heavy losses as money market investors raised bets on two or three interest rate rises this year.<\/p>\n Brent crude jumped 10 per cent<\/a> and briefly punched through $119 a barrel, almost double the price at the start of the year. Oil ended the session up 2\u00a0per cent at $109 after the Trump administration outlined steps to expand supply.<\/p>\n Natural gas contracts in the UK rose as much as 29\u00a0per cent, while benchmark Dutch gas prices hit their highest level since January 2023.<\/p>\n The FTSE 100<\/a> suffered its steepest daily fall since March 3, losing 2.4\u00a0per cent to 10,063, its lowest close since January. The energy giant BP was among only three blue-chips in positive territory. The index is now almost 8\u00a0per cent off its record closing high, which was reached on the day before America and Israel launched attacks on Iran<\/a>.<\/p>\n The price of gold, a non-yielding asset whose value is eroded by higher \u00adinterest rates, fell 5\u00a0per cent.<\/p>\n The renewed market sell-off came after a missile attack on Iran\u2019s vast South Pars gasfield<\/a> prompted an \u00adIranian retaliatory aerial assault on Ras Laffan in Qatar, the world\u2019s largest LNG terminal, and across the Gulf.\u00a0<\/p>\n Qatar Energy, the state-owned group, said missiles that hit Ras Laffan caused damage worth $20\u00a0billion a year in lost revenue that would take up to five years to repair, affecting supply to markets in Europe and Asia.<\/p>\n Business newsletter<\/p>\n The business editor\u2019s exclusive analysis of all the latest financial and economic news.<\/p>\n \t\t\t\t\tSign up with one click<\/p>\n Saad al-Kaabi, Qatar Energy\u2019s chief executive and the country\u2019s minister for energy affairs, said: \u201cThese unjustified and senseless attacks weren\u2019t just an attack on the state of Qatar but attacks on global energy security and stability.\u201d<\/p>\n He said the group would be forced to declare force majeure on long-term contracts for up to five years for LNG supplies bound for Italy, Belgium, South Korea and China.<\/p>\n \u201cI never in my wildest dreams would have thought that Qatar would be in such an attack, especially from a brotherly Muslim country in the month of Ramadan,\u201d he told Reuters. \u201cThese are long-term contracts that we have to \u00addeclare force majeure. We already \u00addeclared, but that was a shorter term. Now it\u2019s whatever the period is.\u201d<\/p>\n