Oil at 18-month high on Syria fears
Oil prices have reached their highest level since February following a sharp rise triggered by the threat of military action in Syria.
London Brent oil prices saw their biggest one-day rally in six months yesterday and were up another 0.3% to US$115 (€86) a barrel today, while the price of US crude jumped to an 18-month high of just over $109 a barrel.
Global stock markets have also slid into the red as investors flock to safe-haven assets, such as gold and government bonds.
The prospect of rising fuel costs knocked listed airlines, sending shares in British Airways owner International Airlines Group down 5% and budget carrier easyJet 4% lower.
The FTSE 100 Index was down 0.5% at 6411.6 following a fall of more than 50 points on Tuesday, while there were also hefty equity declines across Europe with the Dax in Germany more than 1% lower.
Gold prices rose to hit a three-and-a-half month high of 1.433.85 dollars an ounce at one stage in a flight to safety as traders believe the precious metal will hold its value better in times of uncertainty.
Ishaq Siddiqi, market strategist at ETX Capital, warned that tensions in the Middle East had the potential to trigger a major disruption to oil supply, which risked throwing the global economic recovery off course.
He said: “Once filtered through to the real global economy, the increase in oil prices will put a halt to the current pace of economic momentum we are currently experiencing in major parts of the world.
“It’s plausible that Brent oil prices could be over $120 a barrel in the coming days – and, if oil prices spike even higher, it wouldn’t be out of the question for the Federal Reserve to hold off on tapering stimulus measures this year.”
Syria is not a major oil producer, but there are concerns that conflict in the region will disrupt the flow of oil from the Middle East, with worries that violence could spread to other oil exporting countries, such as Iran and Iraq, and hit important shipping routes.
The rising cost of crude provided a boost to oil stocks on the London market, with Royal Dutch Shell up 2% and BP nearly 1% higher, while oil and gas exploration and production group Tullow Oil was another beneficiary, up 2%.
