Energy Supply Disruptions Feared as Middle East Tensions Rise
Crude oil prices surged on Friday after Israel launched strikes at Iran, prompting fears of energy supply disruptions from the Middle East. US benchmark West Texas Intermediate crude oil futures jumped as much as 14% late Thursday, with analysts predicting further impacts on global energy markets.
JPMorgan analysts warned of significant impacts on energy markets, while Warren Patterson of ING highlighted the need for a larger risk premium to account for potential supply disruptions. Mohamed El-Erian cautioned of higher gasoline prices and reduced chances of interest rate cuts due to the escalating tensions.
Iran's threats to close the key oil shipping route through the Strait of Hormuz have added to concerns, with nearly a third of global seaborne oil passing through the strait. The recent surge in oil prices follows a period of low volatility, with global markets reacting negatively to the heightened geopolitical uncertainty.
Stock market futures and European markets opened lower, with traditional haven assets seeing increased demand. The US dollar index rebounded after hitting a three-year low. Israel's preemptive strike on Iran's nuclear program further escalated tensions in the region, with the operation expected to continue.
