LONDON: Global shares fell on Thursday as attacks on oil tankers in the Gulf shattered any prospects of an imminent de-escalation in the Middle East conflict, pushing oil prices above US$100 a barrel and stoking fresh inflation concerns.
The reaction underscores how swiftly bets on an early end to the war, which gathered pace earlier this week, are being unwound.
Conflicting messages from US President Donald Trump have left traders wary of being caught wrong-footed, prompting them to stick to the sidelines or seek refuge in safe havens.
The International Energy Agency’s plan to release 400 million barrels of oil from its reserves, announced on Wednesday in the largest such move in its history, failed to soothe investors.
Brent crude futures LCOc1jumped as much as 10.4% to US$101.59 a barrel, before trimming gains, as doubts persisted over whether reserve releases would be enough to cushion the hit from the Middle East supply shock.
US crude futures CLc1 were last trading 5.2% higher at US$91.82.
“Even if the reserves are large, how quickly they can be delivered to markets is untested. Ultimately, a market balanced via strategic stock releases is going to be far less logistically efficient,” said Joel Hancock, energy analyst at Natixis CIB.
The STOXX 600, the pan-European equity benchmark, slipped 0.5%. Futures tracking the S&P 500 ESc1 and the tech-heavy Nasdaq 100 NQc1 in the US were also both down 0.5%.
The MSCI All-World index fell 0.3%. Odds on prediction markets platform Polymarket implied a 26% chance of a ceasefire between the US and Iran by March 31, lower than 45% earlier this week.
Two fuel tankers in Iraqi waters were struck by explosive-laden Iranian boats, Iraqi security officials said early on Thursday, while an Iraqi official told state media that its oil ports “have completely stopped operations.”
Bloomberg News reported that Oman has evacuated all vessels from its key oil export terminal at Mina Al Fahal as a precautionary measure.
“The market remains very concerned in terms of what’s going on in the Strait of Hormuz, and basically, information that we are getting over the last 24 hours is not a good reading,” said Rodrigo Catril, a senior FX strategist at NAB.
“It sort of reemphasizes the view that we should be worried about this and the risk is oil prices are going to get higher from here rather than coming down.”
Iran had earlier stepped up attacks on merchant ships in the Strait of Hormuz, raising the number of ships struck in the region since fighting began to at least 16. Tehran has warned the world to get ready for oil at US$200 a barrel.
Data on Wednesday showed the US consumer price index rose 0.3% in February, in line with forecasts and above January’s 0.2% increase. The report, however, was not regarded as particularly relevant given that the Iran war has started to fuel inflation.
In bond markets, the risk of rising inflation outweighed safe-haven considerations to push yields higher globally. Yields on 10-year Treasury notes rose 2 basis points to 4.2257% on Thursday, having jumped 7 bps overnight.
Fed funds futures extended their slide as investors feared higher inflation would make it harder for the Federal Reserve to ease policy. Markets are wagering just one more rate cut from the Fed this year.
On the other hand, the danger of energy-driven inflation has led markets to wager the next move in rates from the European Central Bank could be up, possibly as early as June.
Nervous investors sought the liquidity of dollars while shunning currencies from countries that are net energy importers, including Japan and much of Europe.
The euro slipped 0.2% to US$1.1548. The dollar was steady at 158.88 yen, pulling back slightly after hitting the strongest level since January when reported rate checks from the US Fed spooked yen bears.
