Oil adds to gains after US attack on Iranian general
Oil prices pushed upwards on Monday, adding to gains made after a US air strike took out one of Iran’s top general last week.
Brent crude smashed through the 70 dollars per barrel mark early in the day, before losing some of its gains, up 0.75% to 69.34 dollars.
Meanwhile, the US standard, West Texas intermediate, was up around 1.2% to 63.78 dollars.
It caps off strong gains for oil since US President Donald Trump ordered the attack that killed Qassem Soleimani, the head of Iran’s elite Quds Force.
The drone strike has raised fears of a potential escalation of violence in the region, and even an all-out war between the US and Iran.
Traders have pushed up the price of oil in response to the fears. They worry that a war in the region would cut off supplies and restrict shipping through the vital Strait of Hormuz, where a fifth of the world’s oil supply is transported.
The strait, around 20 miles across at one point, sits between Iran and the Arabian Peninsula, home to its local rival Saudi Arabia.
The influence that the choke point has on international markets became apparent in September when an attack on Saudi oil sites – which Saudi Arabia blamed on Iran – sent prices up as much as 20%.
Iran has promised to retaliate after Friday’s attack.
The news has also been a boon for London-listed oil majors and weapons manufacturers. BP was up around 1.85% on Monday, while BAE Systems rose 1.65%, leading the FTSE 100.
However it was worse for the overall exchange, with the FTSE losing 67 points, or 0.9%, to 7555. The biggest losers included the airlines, which are sensitive to fuel prices.
“The escalation in the Middle East was both unexpected and unwelcome. Investors are now fully in defensive mode, hoping for the best but fearing the worst,” said Craig Erlam, an analyst at Oanda.
Last week the AA warned that if the price sticks above 70 dollars per barrel, petrol prices could see a repeat of their 130p levels last seen in May.
Meanwhile, gold prices hit a seven-year high, outstripping their peak in 2019, as investors looked for a safe haven amid falling stock markets.
“The escalation of tensions in the Middle East has since sent gold to a seven-year high, as markets seek refuge in a traditional safe haven in times of uncertainty,” said Olivier Konzeoue at Saxo Markets
He added: “We expect Gold to redeem some of its recent gains at the first signs of de-escalation.”