Brent Oil Surges Above $120 on Iran Conflict Concerns

Key Moments

Oil Markets Jolt Higher on Iran War and Strait of Hormuz Concerns

HONG KONG – Brent crude futures briefly surged beyond US$126 a barrel early Thursday as stalled talks between the United States and Iran fueled uncertainty over reopening the Strait of Hormuz and achieving a lasting resolution to the Iran war.

Brent crude for June delivery climbed 3.3 per cent to $121.90, after a short-lived spike above $126. The July Brent contract advanced 1.4 per cent to $112.02.

Benchmark U.S. crude rose 1.3 per cent to $108.28 per barrel.

Before the outbreak of war in late February, Brent crude had been trading near $70 per barrel.

There is still no clear route to ending the conflict. The United States has maintained its blockade of Iranian ports while the Strait of Hormuz remains shut, further lifting oil prices. Reports on Thursday pointing to a potential escalation by U.S. President Donald Trump dampened expectations for a swift resolution.

“The breakdown of talks between the U.S. and Iran, along with President Trump reportedly rejecting Iran’s proposal for a reopening of the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows,” ING Bank strategists Warren Patterson and Ewa Manthey wrote in a research note.

Oil prices differ depending on crude grade, trading venue, and futures contract terms. By certain measures, Brent has reached its highest point since it peaked at $147.50 a barrel in 2008 during the global financial crisis.

Currency Markets: Dollar Strength Eases Against Yen

Amid the market turmoil sparked by the war, the U.S. dollar weakened to 160.02 Japanese yen after earlier climbing to its strongest level in nearly two years on Thursday. It had closed at 160.44 yen on Wednesday.

The dollar has appreciated against several major currencies, helped by its standing as a safe haven for investors in periods of heightened risk and by comparatively high U.S. interest rates as the Federal Reserve attempts to support economic growth while restraining price increases that are partly linked to the war.

The Fed’s decision on Wednesday to leave interest rates unchanged at its policy meeting lent additional support to the dollar. Analysts said Japanese authorities are likely to step in if yen depreciation deepens significantly.

The euro strengthened to $1.1686 from $1.1675.

Equity Futures and Global Stock Performance

U.S. equity futures slipped and global stock markets were mixed following a subdued session on Wall Street on Wednesday.

European Markets Mixed

In early European trade, Britain’s FTSE 100 gained 0.5 per cent to 10,259.08. France’s CAC 40 fell 1.1 per cent to 7,985.62, while Germany’s DAX was 0.2 per cent lower at 23,896.19.

Asian Stocks Mostly Lower Amid Energy Shock

Asian equity benchmarks mostly declined. Tokyo’s Nikkei 225 slipped 1 per cent to 59,284.92, while South Korea’s Kospi dropped 1.4 per cent to 6,598.87.

Hong Kong’s Hang Seng index fell 1.3 per cent to 25,776.53. The Shanghai Composite index edged up 0.1 per cent to 4,112.16. An official survey indicated that China’s factory activity in April slowed slightly but stayed in expansion territory for a second month, despite the global energy shock triggered by the Iran war.

Australia’s S&P/ASX 200 declined 0.2 per cent to 8,665.80.

Taiwan’s Taiex was down 1 per cent, and India’s Sensex slipped 0.5 per cent.

Wall Street Ends Mixed

On Wednesday, U.S. stocks delivered a mixed performance. The benchmark S&P 500 slipped less than 0.1 per cent to 24,673.24. The Dow Jones Industrial Average dropped 0.6 per cent to 48,861.81, while the Nasdaq composite inched up less than 0.1 per cent to 24,673.24.