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Oil prices stayed over $100 per barrel yesterday with no end in sight to the disruption in supplies of crude, while stock markets slid lower. With the conflict heading towards its third week, equity markets fell further amid investor worries about an extended crisis that could fan inflation and hammer the global economy.
The price of Brent crude, the benchmark international oil contract, dipped below $100 during the day, sending equities briefly higher.
But stocks slid back into the red as Brent climbed back above the $100 mark. “Crude oil is continuing to dictate direction for markets as we head towards the end of a volatile week… the pressure remains with no end in sight in the Middle East conflict,” said Fawad Razaqzada, market analyst with Forex.com.
“Traders are trying to figure out what a fair value for crude oil is right now, given the big release of emergency oil reserves, and the temporary relaxation of sanctions on Russian oil sales that’s already at sea,” he added.
Iran’s closure of the Strait of Hormuz — through which a fifth of global crude oil and liquefied natural gas passes — has sent energy prices soaring. That in turn is causing worries of rising prices rippling through the economy. “Fears of a burgeoning energy crisis remain front and centre for investors,” noted Joshua Mahony, chief market analyst at Scope Markets.
“Inflationary fears are particularly prevalent with each day that passes,” Mahony added. Major central banks, which prior to the war’s outbreak were heavily forecast to keep cutting interest rates, are now widely expected next week to freeze borrowing costs or even hike them to keep a lid on inflation.
