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05-07-2025
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OPEC+ Surprises With Oversized Output Hike
OPEC+ will ramp up oil production more aggressively than anticipated in August, accelerating the rollback of its 2023 voluntary supply cuts in a bid to capture market share amid peak summer demand. At a virtual meeting Saturday, eight core members led by Saudi Arabia agreed to add 548,000 barrels per day (bpd) to global supply—exceeding earlier expectations of a 411,000 bpd hike. The move sets the bloc on track to fully unwind 2.2 million bpd of prior cuts nearly a year ahead of schedule. The decision reflects short-term bullish fundamentals: inventories are low, refining margins are strong, and U.S. refiners are processing the most crude for this time of year since 2019. Still, it signals a major pivot from price defense to volume maximization. In a quote to Bloomberg, Onyx Capital's Harry Tchilinguirian noted that "It was pointless to keep a notional voluntary cut in place,' said . 'Better to get it over with and move on.' But while Saudi Arabia pushes discipline, Kazakhstan is going its own way. In June, Kazakhstan's crude output surged 7.5% to 1.88 million bpd—well above its official OPEC+ quota of 1.5 million bpd. This matched its all-time production high, largely driven by Chevron's expansion of the Tengiz mega-field, which alone added 140,000 bpd month-over-month. Kazakhstan's total oil and condensate production hit 2.15 million bpd in June, up from 2.02 million in May. Despite repeated pledges of OPEC+ compliance, Kazakh authorities admit they can't enforce production cuts on foreign-led projects like Tengiz or Kashagan. 'The republic has no right to enforce production cuts,' Energy Minister Yerlan Akkenzhenov said in May. Chevron, for its part, has stated bluntly that it doesn't 'engage in discussions about OPEC or OPEC+.' Meanwhile, oil prices remain under pressure. Brent futures are down more than 6% year-to-date, and analysts estimate that global inventories have been climbing at 1 million bpd in the first half of 2025, amid cooling demand in China and production increases in non-OPEC countries. Analysts at JPMorgan and Goldman Sachs earlier this year warned prices could dip below $60 in Q4. OPEC+ is betting that strong summer demand will soak up the new supply. But as Kazakhstan pumps freely and Saudi Arabia chases volume, the group's cohesion faces growing uncertainty. By Tom Kool for More Top Reads From this article on
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23-06-2025
- Business
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Oil price plunges after Iranian missile strike
OIL prices plunged to the lowest level in a week last night as Iran launched a missile strike on US military bases in Qatar. Brent crude fell by as much as 7.6pc to $71.15 a barrel in response to the retaliatory attacks, which were less severe than traders had expected. By avoiding energy infrastructure in the region, the strikes eased concerns that Tehran would hit back against America by disrupting global oil supplies. This came after traders had feared Iran could close the Strait of Hormuz, the vital 'chokepoint' that serves as a shipping gateway to the Gulf. It reflected a sharp turnaround in the market, as oil prices had previously surged to a five-month high earlier in the day. Following Iran's attack on the Al Udeid air base yesterday, which did not result in any casualties, Onyx Capital analyst Harry Tchilinguirian said: 'This appears to me well orchestrated. 'Iran hits an empty US base, plenty of warning ahead with airspace closure and guidance for shelter. Iran gets its face-saving response and stays clear of the Straits of Hormuz.' It came after Donald Trump demanded an immediate increase in US oil production to keep prices down. In social media posts, the US president warned markets to 'KEEP OIL PRICES DOWN' and then later called on his government's energy department to 'DRILL, BABY, DRILL... And I mean now!' Any disruption to oil and gas supplies would cause a spike in prices, analysts have warned. Global investment giant Stifel predicted that it could cause household energy bills in Britain to almost triple to £4,500 in a worst-case scenario. Heightened tensions in the Middle East led to tankers being warned of an 'elevated risk' in the Strait of Hormuz yesterday amid reports that ships were having their navigation systems jammed. The Joint Maritime Information Center (JMIC) warned that ships entering and departing the Persian Gulf were being hit by 'persistently higher levels of electronic interference' that had scrambled satellite navigation and anti-collision systems. One fifth of global oil supplies and about one third of liquified natural gas (LNG) cargoes pass through the Strait, with analysts warning that a disruption to shipping risks pushing up prices. Yesterday, maritime tracking data showed ships behaving cautiously, with some performing about-turns, sailing in zigzags or approaching the strait more slowly than usual. More than 20pc of the vessels passing through the strait on Sunday experienced GPS jamming, according to data provider Windward. In the JMIC notice yesterday, ships were told: 'JMIC recommends the shipping industry remain vigilant to the changing security environment and have threat and risk mitigation plans at-the-ready.' It said that Iran could soon close the strait, after its parliament approved a motion to close the tanker route in response to the US air strikes. The decision is non-binding and a final decision rests with Iran's Supreme National Security Council. However, an EU official claimed Iran did not have the ability to block the Strait of Hor muz 'long term', although it could hamper shipping. Closing the strait would be 'a form of suicide', the official said. They added: 'The effect on Israel would be close to zero, the effect on themselves immense, as well as on the United States, Europe and China.' Iran's own energy exports, in spite of sanctions, remain an important source of income for the world's ninth-biggest oil-producing country. Thanks for joining us on this markets blog today. Oil remains down 7.3pc, while on Wall Street the S&P 500 and Nasdaq are up 0.8pc, while the Dow Jones is up 0.7pc. You can read all our latest markets news and commentary here. Canada and the European Union have signed a defence and security pact as they seek to better confront Russia, with worries over US reliability under President Donald Trump. The deal was announced after a summit in Brussels between Canadian prime minister Mark Carney and EU chiefs Ursula von der Leyen and Antonio Costa. 'While Nato remains the cornerstone of our collective defence, this partnership will allow us to strengthen our preparedness ... to invest more and to invest smarter,' Mr Costa, who heads the European Council representing EU member states, told a press conference. 'It opens new opportunities for companies on both sides of the Atlantic.' The pact seeks to bring Canada's defence industry more closely into European efforts to revamp the domestic industrial base. It opens the door for Ottawa to join common procurements under a recently approved €150bn (£128bn) loan programme backed by the EU's central budget to boost rearmament. It also paves the way for Canadian defence firms to tap into the scheme, although that requires the signing of a separate deal. The EU said the pact would deepen cooperation in areas including crisis management, defence industry collaboration, hybrid threats and military mobility. Britain signed a similar defence partnership in May, and Australia and the EU announced they had started negotiating another one last week. Wall Street's 'fear index' - known as the Vix - has fallen this evening as traders became more relaxed about the threat from Iran. The index surged as much as 9.2pc during early evening trading but has since fallen and is 3.1pc down on the day. Markets view Iran's attack on an US airbase as a gesture that is much less serious than closing the Strait of Hormuz, which would hinder oil trading. The cost of a barrel of oil has continued to fall this evening, with prices dropping as much as 5.9pc. It comes after Iran chose military targets rather than - for now - closing a key route for oil tankers. The cost of a barrel of oil plummeted this evening after Iran launched a missile attack on the US Al Udeid air base in Qatar. Brent crude is down 4.1pc after Iran's retaliatory action seemed less severe than they had feared. Harry Tchilinguirian, group head of research at Onyx Capital Group, told Bloomberg: 'This appears to me well orchestrated, Iran hits an empty US base, plenty of warning ahead with airspace closure and guidance for shelter. Iran gets its face saving response and stays clear of the Straits of Hormuz.' Wall Street fell this evening amid reports about Iranian retaliation. The Wall Street Journal has reported that Iran is moving missile launchers into place for a potential attack on US forces in the Middle East. Meanwhile, Reuters and others have reported that explosions have been heard over Qatar capital of Doha. US stock markets are currently experiencing some choppy trading, with the S&P 500 and the Nasdaq fluctuating between green and red. The Dow Jones is down by 0.1pc. UK energy bills could triple to 'disastrous' levels if a closure of the Strait of Hormuz disrupts the market in liquefied natural gas (LNG), an investment bank has claimed. Chris Wheaton, an oil and gas analyst at Stifel, has warned than a closure of the Strait of Hormuz would cause gas prices to surge. In a note reported by GB News, Mr Wheaton said: 'We are much more worried about European gas prices than we are about oil prices.' 'If LNG production from Qatar and the UAE was disrupted, we see a repeat of 2022: European gas prices rising so LNG flows to Europe and not Asian consumers to ensure storage is filled.' 'In a UK context, that would mean a UK energy price cap of £3,000-£4,500 per year, which would be economically and politically disastrous, in our view.' The FTSE 100 closed at a more than three-week low on Monday as a stronger pound dented shares of international firms. Investors, meanwhile, mulled potential escalation in the ongoing Middle East conflict. The internationally exposed FTSE 100 index dipped 0.2pc to finish the session at its weakest level since May 30. Dovish remarks from a US Federal Reserve official lifted helped boost the pound by 0.4pc against the American currency. This, in turn, weighed on the shares of global companies including HSBC and British American Tobacco. The domestically focussed FTSE 250 index closed 0.1pc lower. Investors braced for Iran's possible response to US airstrikes on some of the country's nuclear facilities over the weekend, a major escalation of conflict in the Middle East - a region that is crucial to global oil supply. Oil prices, however, eased from a five-month high as the markets tried to gauge the impact on transit of oil and gas via the Strait of Hormuz. Britain's oil giants Shell and BP inched higher, while Harbour Energy gained 1pc. Sir Keir Starmer has announced what he described as an industrial military co-production agreement with Ukraine, following a meeting with President Volodymyr Zelensky in London today. 'I'm really proud that ... we're able to announce an industrial military co-production agreement - the first of its kind so far as Ukraine and the UK are concerned - which will be a massive step forward now in the contribution that we can continue to make,' Sir Keir said. Investors are 'speculating' than Iran's military capabilities are now limited and that its ability to retaliate is restricted, an anlsyst has suggested. David Morrison, at Trade Nation, said: 'The prevailing view appears to be that the US involvement will prove limited militarily, yet effective, by seriously undermining Iran's nuclear ambitions. 'Investors are also speculating that Iran's ability to retaliate has been severely restricted.' Tensions remained elevated, however, as Iran and Israel intensified attacks on each other on the war's 11th day. Russ Mould, of stockbroker AJ Bell, said: 'The markets are not yet reacting with any degree of panic to the US airstrike on Iran's nuclear facilities as they await to see how Tehran responds.' Iran does not have the ability to block the Strait of Hormuz 'long term', a senior EU official has said, although it could hamper shipping. But 'it would be a form of suicide to do that,' the official told AFP. 'The effect on Israel would be close to zero, the effect on themselves immense, as well as on the United States, Europe and China.' Iran's own energy exports, in spite of sanctions, remain an important source of income for the world's ninth-biggest oil-producing country. Currently, traders do not appear too concerned. Brent crude is trading at $76.20 on Monday, marginally changed from Friday's close. 'Looking at the oil price ... it is clear that the oil market doesn't assign a very high probability of (a closure) happening,' said Bjarne Schieldrop, chief commodities analyst at SEB bank. US stock markets rallied this afternoon as investors looked past worries of potential oil supply disruptions after the United States' strikes on nuclear facilities in Iran. Meanwhile, oil prices dipped by around 1pc to $76.3 per barrel, having touched a six-month high earlier, as oil and gas transit continued on tankers from the Middle East. Iran has repeatedly threatened to retaliate against the weekend's US bombing, but is yet to do so in a meaningful way. Shares have been pressured in recent days as the Israel-Iran attacks raised concerns about a wider conflict in the Middle East, disrupting oil prices and raising concerns about a resurgence in inflationary pressures. 'I think the market is certainly in a holding pattern, waiting to see the level of Iran's response to the US weekend attacks,' said Ross Mayfield, investment strategist at Baird. 'There's a sense that investors are conditioned not to think that geopolitical conflicts in the Middle East will have a long-term impact on the market.' The S&P 500 is up 0.3pc, the Nasdaq is up 0.4pc and the Dow Jones is up 0.1pc. Investors were more pessimistic in Europe, with the FTSE 100 down 0.1pc, France's Cac 40 down 0.6pc and the German Dax down 0.2pc. The European Central Bank will be watching for signs that an energy price spike from the Iran conflict might rekindle inflation, the bank's president Christine Lagarde told the European Parliament on Monday. 'We will be particularly attentive to the price of commodities going forward,' she told lawmakers during a regular appearance at the Economic and Monetary Affairs Committee. If the conflict did squeeze oil supplies or drive up prices, it 'could be of such depth and duration that it would trigger secondary effects, which would apply on a much broader basis than the simple conduit of energy prices', she said. Ms Lagarde said it was 'difficult' to gauge how inflationary an oil-price shock would be in the medium and longer term. The ECB would need to be sure that the shock's impact was long-lasting before shifting monetary policy. 'The central bank is going to be attentive to how persistent, how deep that supply shock is going to be,' she said, noting that the key metric on this would be any increase in Europeans' broader inflation expectations. Oil firms including BP and TotalEnergies have evacuated some foreign staff from southern Iraq, the state-owned Basra Oil Company said Monday. The evacuations are due to the 'security situation' in the region, an official told AFP. British energy giant BP, which is one of the biggest foreign players in Iraq's oil sector, evacuated staff from the huge Rumaila field. The evacuation 'has not affected' production since Iraqi staff are handling operations in coordination 'remotely' with the British firm, Basra Oil Company said. Russian oil giant Lukoil and Chinese companies have not evacuated their staff. Iraq is a founding member of the OPEC cartel, and its crude oil sales make up 90 percent of Iraq's budget revenues. Since the start of the Iran-Israel war last week, fears have grown that the violence could spread to Iraq, where US troops are deployed as part of an anti-jihadist coalition. After the US attacked three Iranian nuclear facilities on Sunday, an Iranian official warned that bases in the region used in the attacks 'will be considered legitimate targets'. Iran-backed armed factions in Iraq had also threatened Washington's interests in the region if it were to join Israel in its war against Iran. Pipelines would only able to transport 30pc of the oil currently moved through the Strait of Hormuz, economists have said. A team of commodities specialists at Capital Economics said: 'In principle, some of these oil flows could be exported via other routes. For example, the East-West pipeline in Saudi Arabia connects to the Red Sea and has capacity of 5m barrels per day (equivalent to more than 80pc of Saudi crude exports in 2024). 'This pipeline was temporarily expanded in 2019 to be able to transport 7m barrels per day of oil when Saudi oil tankers were previously attacked near the Strait. Meanwhile, there is also a 1.8m barrels per day pipeline that would enable the UAE to continue exporting crude without passing the Strait of Hormuz. 'That said, there is only limited pipeline capacity available to be used. 'For what it's worth, Saudi Arabia already appears to be making greater use of the East-West pipeline and exporting more oil from the Red Sea. And given that most oil flows originating from Iraq, Kuwait, and Iran itself can't be diverted, we estimate that no more than 30pc of existing oil flows could be redirected.' Traders shrugged off the US strikes in Iran to send stocks on Wall Street higher. The Dow Jones Industrial Average was up 0.5pc, while the S&P 500 and Nasdaq Composite gained about 0.6pc. All three indexes had started trading marginally lower. However, oil has wiped out its early morning rally and was last trading down 1pc at just over $76 a barrel. The US energy secretary has backed Donald Trump's order to 'drill, baby, drill' following the recent surge in oil prices. Chris Wright tweeted 'we're on it' after the US president wrote on his Truth Social platform that America needed to excavate more crude 'now!' Global airlines have suspended or reduced flights in the Middle East as the conflict between Israel and Iran deepens with US involvement. British Airways cancelled flights between Heathrow and Dubai and Doha on Sunday following the US strikes on Iran, although it said it was 'scheduled to operate as normal' on those routes today. Air France halted flights to Saudi Arabia and the United Arab Emirates until at least Tuesday inclusive, the airline said. It also extended the suspension of the Paris-Tel Aviv route until July 14. Flights of Air France's low-cost carrier Transavia from Paris to Beirut have been suspended until June 30 while the Tel Aviv route is closed until September 7. Germany's Lufthansa group, whose other airlines include Swiss, Austrian and ITA, has suspended flights to the Middle East until June 30. The Amman and Erbil, Iraq, routes were also suspended until July 11. The group will not fly to Tel Aviv and Tehran will until July 31 and is also avoiding the air space of countries involved in the conflict. Greece's Aegean Airlines has stopped Tel Aviv flights until July 12. Its Amman, Beirut and Erbil routes are closed until June 28. Turkish airline Pegasus has scrapped flights to Iraq, Jordan and Lebanon until June 30, and Iran until July 30. No Turkish Airlines flights to Baghdad, Damascus and Tehran are available before July 1. JP Morgan has begun limiting staff travel to the Middle East amid the deepening turmoil. The Wall Street bank is only allowing essential employee journeys in and out of the region after the US launched strikes on Iran's nuclear sites over the weekend. JP Morgan declined to comment. Donald Trump issued a warning to oil-producing nations to 'keep oil prices down' as he urged the US energy department to 'drill, baby, drill'. Here are his latest posts from his Truth Social network: Wall Street's main stock indexes fell at the opening bell ahead of a potential retaliation by Iran to US strikes on its nuclear facilities. The Dow Jones Industrial Average fell 0.2pc to 42,119.74 while the S&P 500 declined 0.1pc to 5,960.27. The tech-heavy Nasdaq Composite dropped 0.5pc to 19,344.20. Rachel Reeves called for a de-escalation of the conflict in the Middle East amid the threat of higher oil prices. The Chancellor said he Government was following developments closely in the Strait of Hormuz amid the deepening conflict, which has seen oil prices jump by 20pc this month. She said: 'It is not in the interests of anybody to escalate this conflict further because of the consequences for the Middle East, but also the consequences globally, including for the economy.' Asked about rising oil prices, she said: 'We want de-escalation because it's the right thing for the Middle East, but we also want de-escalation because of the ramifications of conflict in the Middle East for the rest of the world including the UK. 'We have seen increases in oil prices in recent days and weeks, which of course will have an impact on the UK economy. We recognise the challenge that businesses and families face with energy costs. 'Of course, higher oil prices will have implications for the UK economy. One of the reasons we want de-escalation is to ensure that oil continues to flow and to ensure that that key route, both for oil and for wider trade - the Strait of Hormuz - continues to be open.' Iran would be 'foolish' to try to close the Strait of Hormuz, the White House press secretary has said. Karoline Leavitt told reporters: 'The administration is actively and closely monitoring the situation in the Strait of Hormuz. 'The Iranian regime would be foolish to make that decision.' The spike in oil prices since the start of the latest conflict between Israel and Iran should not lead to a 'major hike' in petrol prices, RAC has said. The average price of a litre of petrol has increased by 1.5p to 133.5p in the last week while diesel has gone up by 2p to 140p, the motoring group said. Head of policy Simon Williams said: 'Although the cost of a barrel of oil jumped by $5 to $74 straight after Israel's 13 June attack on Iran, so far it hasn't climbed much higher. 'It's now at trading around $77 – $12 a barrel more expensive than it has been for the last three months – which is not yet enough to cause a major hike at the pumps. 'As retailer margins have been high for some time, the oil price rise has squeezed these to fairer levels for drivers. If, however, retailers are set on maintaining margins of around 12p a litre, we may well see the average price of fuel go up further. 'It's also important to note that the oil price is a long way off the $137.72 seen in the early days of the Ukraine war in spring 2022 which led to average prices reaching record highs in the summer of 191.5p for petrol and 199p for diesel.' Oil prices were little changed despite some tankers performing U-turns in the Strait of Hormuz. Brent crude was last up 0.8pc to just below $78 a barrel, having earlier surged to a five-month high above $81. US president Donald Trump said he had 'obliterated' Iran's main nuclear sites in strikes over the weekend, joining an Israeli assault in an escalation of conflict in the Middle East as Tehran vowed to defend itself. Jane Foley, an analyst at Rabobank, said: 'The direction of oil prices reflects the market's cumulative view on what it deems to be the current level of risk regarding the Middle East crisis. 'Brent oil spiked higher at the open only to fall back to below levels traded towards the end of last week. 'There is a strong consensus agreement that if Iran were to close the Strait of Hormuz in retaliation to the weekend strikes by the US on three of its nuclear facilities, then oil prices would spike to somewhere over USD100 /b. 'There is also a strong view that Iran would be upsetting its ally China by taking such action in addition to undermining its beleaguered economy even further. 'Thus, it may again avoid taking the often-threatened action.' Supertankers have performed U-turns in the Strait of Hormuz amid uncertainty over how Iran will retaliate against US strikes on its nuclear sites. Six of the giant vessels, some capable of carrying 2m barrels of crude, turned back after entering the crucial trade route over the last 24 hours, according to vessel tracking data from MarineTraffic. Three of the ships – named the Coswisdom Lake, South Loyalty and Damsgaard – eventually made second U-turns and headed through the Strait today. It comes after Greece's shipping ministry warned on Sunday that the country's owners should think twice about using the route. Meanwhile two large Japanese shipping companies said they will cut exposure to the strait, where a fifth of the world's oil and gas supplies pass through. US stock indexes were on track to fall at the opening bell as investors wait to see how Iran will respond to US attacks on its nuclear sites. Energy stocks rose in premarket trading, tracking a surge in crude prices. Shares of energy majors Chevron rose 0.8pc and Exxon gained 1.1pc. Defense stocks also rose, with Lockheed Martin up 0.8pc, RTX Corporation gaining 0.9pc, Northrop Grumman advancing 1.2pc and L3harris Technologies jumping 1.3pc. Shares of US airlines were mostly down, with Delta Air Lines, Southwest Airlines, United Airlines and American Airlines falling between 0.3pc and 0.8pc. Ahead of the opening bell, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 were all down about 0.1pc. Gas prices remained close to their highest level since April amid the uncertainty caused by the US strikes against Iran. Europe's benchmark contract rose as much as 3.7pc to more than €42 per megawatt hour after Iran's parliament voted to close the crucial Strait of Hormuz. Goldman Sachs warned prices could jump as high as €74 – levels not reached since the first year of the Ukraine war – and could even top €100 under 'a hypothetical sustained and very large' disruption to supplies. Bruce Kasman, an economist at JP Morgan, said: 'It remains entirely possible that the situation could be de-escalated. 'However, uncertainty is enormous, and there are plenty of plausible scenarios which could lead to a serious energy crisis.' The streets of Jerusalem were once a byword for hustle and bustle, but not any more as air raid sirens pierce the silence and Iranian missiles hammer Israel's defensive shield, known as the 'Iron Dome'. Since Iran began bombing Israel, locals describe 'a Covid vibe' descending across the city as the regular hum of activity slows amid the threat of bombardment. Shops are shut, schools have closed and many people are working from home to stay close to a bomb shelter. 'It is quiet. The streets are pretty empty, and there is way less public transport than usual,' says Tomer Daloomi, a 34-year-old engineer who lives with his wife and two young children in central Jerusalem. Private sector companies cut jobs for the ninth month in a row as the crisis in the Middle East added to worries about rising costs, a closely watched survey indicated. The S&P Global Flash UK PMI indicated business activity is recovering in Britain overall in June but warned that employment was declining at a faster pace. The Iran conflict comes as bosses were already dealing with the impact of rising staffing costs after the national minimum wage and National Insurance contributions increased in April. Chief business economist Chris Williamson said: 'On top of concerns over the impact of recent government policies and worries over global trade protectionism, June's data collection coincided with increased tensions in the Middle East. Employment has hence continued to be cut as firms grapple with the combination of higher staffing costs, linked to last autumn's Budget, lower demand and subdued confidence. The Prime Minister and the Foreign Secretary are 'irrelevant', according to Telegraph readers, who said the US, Israel and Iran will not listen to them. Here are some of the views from our comments section below and you can share your analysis of the events in the Middle East here: The price of oil was little changed amid speculation that an Iranian blockage of the crucial Strait of Hormuz 'might be a step too far' for the regime. Carsten Brzeski, an analyst at ING, said there was an increased chance that the vital trade route would be closed in retaliation for the US strikes on its nuclear sites. Brent was last at just over $77 a barrel, which is roughly were it was on Friday before the US military action over the weekend. Mr Brzeski said: 'Let's not forget that even if Iran feels it needs to retaliate, blocking the Hormuz might be a step too far. 'Given the potential impact on oil flows and prices from such action, there would likely be a swift response from the US and others. 'Also, with more than 80pc of oil flows through Hormuz ending up in Asia, the impact on the region would be larger than that on the US. 'Therefore, Iran would want to be careful not to upset the likes of China by disrupting oil flows. 'In addition, Iranian oil moves through the Hormuz, too. Blocking the strait would have an impact on these flows.' The Iran conflict has created a 'clear and present risk of energy attacks' that could stoke inflation in the West, analysts have warned. RBC Capital Markets said Tehran has a series of options for how it could disrupt the Strait of Hormuz, adding it is not a 'full closure or nothing' scenario. Analyst Helima Croft said that 'multiple security experts contend that Iran has the ability to strike individual tankers and key ports with missiles and mines'. She also suggested Iran could 'exert serious pressure' on militias it backs in the Middle East. She said: 'We also have to keep a close eye on the Iran-backed militias in Iraq that operate near the all-important Basra energy facilities. 'To be sure, these militias were reluctant to come to the aid of Bashar Al-Assad in Syria and may want to avoid anything that could lead them to the same fate as Hezbollah and Hamas. 'And yet, if the Iranian leadership believes that survival is at stake, it may exert serious pressure on the remaining proxies in Iraq and Yemen to provide much more material assistance.' Oil prices failed to spike significantly in the first trading session since US attacks on Iran as traders had already imposed a 'risk premium' to crude. Brent crude has climbed 20pc since the start of this month, when prices languished at around $60 a barrel, after Israel launched strikes on Iran, ratcheting up tensions. However, prices only spiked to around $81 following the US intervention in the conflict at the weekend and were last down to 0.5pc below $77. Analysts at Saxo Bank said a 'geopolitical risk premium' worth more than $10 per barrel had already been placed on oil in the run up to the weekend's events. They said the rise in prices 'cannot be sustained for long without a tangible supply disruption', adding: 'Absent that price gains may struggle to hold.' The US would face a 'sharply' higher risk of recession if Iran closes the Strait of Hormuz, Goldman Sachs has said. The Wall Street bank warned there was still 'a high risk through July' of further US military action in the region. This could leave crude oil prices remain about $10 a barrel higher than in early June, when prices languished around $60. Economist Jan Hatzius said: 'This price move has only minor implications for inflation and GDP growth in the US and Europe, but we should probably think of it as driven by a small probability of a much bigger move in a tail scenario where the conflict expands significantly further and/or the Strait of Hormuz is closed. 'In that tail scenario, the risk of recession would climb sharply.' The price of oil was only slightly higher as satellite images suggested ships are continuing to operate without disruption in the Strait of Hormuz. Brent crude was up less than 1pc below $78 a barrel, pulling back from an earlier spike which sent prices above $81. Ipek Ozkardeskaya, an analyst at Swissquote Bank, said: 'So far, satellite images reportedly suggest that oil continues to flow through the Strait, which may explain the muted market reaction to the news. 'Many remain optimistic that Iran will avoid a full-blown retaliation and regional chaos, to prevent its own oil facilities from becoming targets and to avoid a widening conflict that could hurt China – its biggest oil customer.' The dollar strengthened after the United States struck Iran's nuclear facilities at the weekend. The pound was down 0.1pc to $1.344 while the euro slipped 0.2pc to just under $1.15 as investors turned to the safe haven US currency. Chris Weston at Pepperstone said Iran would be able to inflict economic damage on the world without taking the 'extreme route' of trying to close the Strait of Hormuz. He said: 'By planting enough belief that they could disrupt this key logistical channel, maritime costs could rise to the point that it would have a significant impact on the supply of crude and gas.' He added: 'While Trump's primary focus will be on the Middle East, headlines on trade negotiations could soon start to roll in and market anxieties could feasibly build.' David Lammy said he was 'an optimist' and believes diplomacy 'must and can prevail' in the Middle East. Asked how worried he was about the situation, the Foreign Secretary told BBC Breakfast: 'I'm an optimist. You have to be an optimist if you're the chief diplomat for a wonderful country like the United Kingdom. 'Of course, this is a stressful time. 'I said it was perilous on Friday, but I still believe that diplomacy must and can prevail.' David Lammy said Donald Trump had made a 'judgment that only he can make' when he launched US strikes against Iran's nuclear sites. The Foreign Secretary said Tehran 'must now take that off-ramp' and engage in negotiations as he indicated the UK was aware in advance of the prospect of US strikes against the country. He told BBC Breakfast it had been 'made very clear' during his meeting with US secretary of state Marco Rubio and Middle East envoy Steve Witkoff that 'President Trump was considering all options and all options were on the table'. Asked whether he was surprised at how quickly the situation had escalated, he said: 'And you know that we have the closest of military relationships and intelligence relationships through the Five Eyes system. 'That means that we can see and, you know, we work together, we know what is being considered. 'He (Donald Trump) made that judgment on Saturday. It's a judgment that only he can make and only the US system can explain. 'I was clear and that's why I went straight to Geneva... to sit with the Iranians. I spent seven hours in Geneva to talk them down to this off-ramp.' He added: 'It is still the case that this can only be sorted out diplomatically, and Iran must now take that off-ramp.' David Lammy said he had told Iran it would be a 'mistake' to blockade the Strait of Hormuz and he thinks the country's supreme leader Ayatollah Ali Khamenei 'gets that'. The Foreign Secretary said he had urged his Iranian counterpart on Sunday to 'be very careful about not escalating in response to the attack on their nuclear sites', and that the minister had said 'he would take that to the supreme leader'. Mr Lammy told BBC Breakfast: 'As I said on Friday, this is a moment of peril. There are neighbours in the region very worried about what the IRGC (Islamic Revolutionary Guard Corps) and the supreme leader might now do. None of us want to see escalation. 'I was crystal clear to the Iranian: it would be a huge, catastrophic mistake to fire at US bases in the region at this time. We have forces in the region at this time. 'It would be a catastrophic mistake. It would be a mistake to blockade the Strait of Hormuz. I think he gets that and understands that. 'But clearly the supreme leader is somewhere in Iran, in a bunker. Messaging to him cannot be easy, but I would urge them to step back at this point and - given that Iran no longer has any air defences at this time, given that they no longer have the proxies in Hezbollah, Hamas is degraded for all of those reasons and their own vulnerability - let's deal with the nuclear programme. 'Let's take the diplomatic off-ramp. Let's get serious and calm this thing down.' The FTSE 100 fell at the open after the US warned Iran against retaliating to its air strikes on the country's nuclear facilities. The UK's blue-chip stock index dropped by 0.4pc to 8,742.93 while the mid-cap FTSE 250 declined by 0.3pc to 21,082.41. The head of the International Monetary Fund (IMF) has warned that the US strikes on Iran could have a wider impact on the global economy. IMF managing director Kristalina Georgieva said there could be 'secondary and tertiary impacts' from an energy price shock if oil prices are sent surging. 'We are looking at this as another source of uncertainty in what has been a highly uncertain environment,' she told Bloomberg TV on Monday. 'Let's say there is more turbulence that goes into hitting growth prospects in large economies — then you have a trigger impact of downward revisions in prospects for global growth.' A protracted disruption of oil and gas exports from the Gulf region 'seems unlikely' as it could anger some of Iran's closest allies. Holger Schmieding, chief economist at Berenberg, said that any decision to close the vital Strait of Hormuz would likely upset China and many other countries that do not usually side with the US. He added: 'Trying to throttle energy exports from the Gulf region would be a high-risk strategy for Tehran.' Eurozone government bond yields rose as investors worry about the potential inflationary impact of an escalation in the Middle East. German 10-year government bond yields, which serve as the benchmark for the wider eurozone, rose nearly four basis points (bps) to 2.55pc. Bond yields are a key indicator of the future cost of government borrowing. Yields tend to rise as bond prices fall. The yield on benchmark US 10-year Treasury bonds was up two basis points at 4.4pc. Trading of UK bonds opens later. The FTSE 100 and other European markets are on track to decline when trading begins for the first time since the US strikes in Iran. The UK's flagship stock index was down 0.5pc in premarket trading, while France's Cac 40 was down 0.7pc and Germany's Dax fell 0.5pc. The price of oil could surge to around $120 a barrel if Iran responds to US strikes by closing the Straight of Hormuz, according to Deutsche Bank. Analyst Jim Reid said the next steps for markets were 'really all about whether the Iranian regime weaponises oil'. Polymarket puts the odds of closure of the Strait before July at 32pc, up from around 10pc on Friday. However, this is well below the 52pc reached on Sunday afternoon following the decision by Iran's parliament to back the closure of the route. After an initial surge about $81 a barrel, oil was last up 1.6pc above $78. Mr Reid said: 'Having been around $68/bbl before concerns over potential Israel's strikes against Iran emerged, around a third probability puts oil at around $85/bbl. 'So perhaps financial markets are pricing in a lower probability of a closure.' Iran has been warned shutting a major oil 'choke point' in the Middle East as retaliation for US strikes on its nuclear facilities would be 'economic suicide'. Marco Rubio, the US secretary of state, urged Iran's allies – including China – to prevent Tehran from shutting the Strait of Hormuz, saying it would be a 'terrible mistake'. 'I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil,' Mr Rubio told Fox News. 'If they do that, it will be another terrible mistake. It's economic suicide for them if they do it. And we retain options to deal with that, but other countries should be looking at that as well. It would hurt other countries' economies a lot worse than ours,' he added. Thanks for joining me. Oil prices briefly hit five-month highs as investors anxiously waited to see if Iran would retaliate against US attacks on its nuclear sites. Brent crude, the global benchmark, rose by as much as 5.7pc to more than $81 a barrel when trading got underway for the first time overnight in the wake of Donald Trump's intervention in the Middle East. Iran's parliament voted to respond to the US strikes by cutting off vital shipping lanes in the Strait of Hormuz, where around a fifth of global oil supplies pass through. However, Brent was last up a relatively restrained 1.1pc at less than $78, with no sign of panic selling across markets. The Iranian parliament's decision is not binding, and state television said a final decision would rest with top Iranian security officials, Reuters reported. Marco Rubio, the US secretary of state, urged Iran's allies – including China – to prevent Tehran from shutting the Strait of Hormuz, saying it would be a 'terrible mistake'. Charu Chanana, an analyst at Saxo, said: 'Markets may be responding not to the escalation itself, but to the perception that it could reduce longer-term uncertainty. 'That said, any sign of Iranian retaliation or threat to the Strait of Hormuz could quickly shift sentiment and force markets to reprice geopolitical risk more aggressively.' Here is what you need to know. 1) British Airways suspends flights to Dubai | UK's flag carrier cancels flights to and from Gulf states following US airstrikes on Iran 2) Iran votes to shut Strait of Hormuz | Closing critical 'choke point' for oil risks triggering fresh energy crisis and global recession 3) Starmer slashes net zero charges to save Britain's factories | Prime Minister to cut power bills by up to 25pc for 'electricity intensive' manufacturers4) Thames Water bonds plunge to record low as nationalisation threat grows | Environment Secretary triggers market panic by stepping up contingency plans for state control 5) Morrisons orders head office staff to work full time | Supermarket abandons flexible working policy as it battles to revive its fortunes Oil prices soared in early Monday trading after Washington entered Israel's war against Iran by bombing Iranian nuclear sites, casting doubts on the outlook for global crude supply. Brent crude, the global benchmark, rose by as much as 5.7pc to $81.40 a barrel when the oil markets reopened on Sunday. West Texas Intermediate rallied by 3.2pc to $76.20 a barrel. Investors have been bracing for Tehran's response to Donald Trump's attacks, with possible outcomes including the closure of the Strait of Hormuz, a crucial oil shipping route. Iran's parliament voted to block the shipping channel on Sunday. The decision, which is not yet final, would be inflationary and cause huge supply disruption. Oil prices had already soared in recent weeks, having risen by around 10pc since Israel attacked Iranian energy facilities 10 days ago. On Friday, Brent crude prices closed at around $77 a barrel. Stock futures were down ahead of Monday trading. On Wall Street, the Dow Jones Industrial Average lost 0.4pc, while the S&P 500 fell by around 0.4pc. In Asia, Hong Kong's Hang Seng shed 0.5pc while Tokyo's Nikkei stayed broadly flat. Australia's S&P/ASX 200 retreated by 0.2pc. The attacks on Iran also prompted a flight to safe haven assets, with spot gold up 0.4pc to $3,380.72 an ounce. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
10-02-2025
- Business
- Reuters
Oil prices climb despite trade war concerns
Summary Trump to announce 25% steel and aluminium tariffs on Monday China responds with retaliatory tariffs on some US exports Trump says he's making progress with Putin to end Ukraine war HOUSTON, Feb 10 (Reuters) - Oil prices rebounded on Monday after posting their third straight week of losses, even though investors remained worried that U.S. President Donald Trump might start a trade war. Brent crude futures were up $1.30, or 1.7%, at $75.96 a barrel by 11:51 a.m. ET (1651 GMT) . U.S. West Texas Intermediate crude added 1.9%, rising $1.36 to $72.36. The gains could have been bargain hunting after prices fell 2.75% last week, pressured by global trade worries. "It's tariff uncertainty which is the name of the game. This affects risk appetite in general and has spillover effects into oil," said Harry Tchilinguiran at Onyx Capital. "After last week's declines, some people may be buying into the dip." Also buoying prices, Russia's Federal Anti-Monopoly Service may initiate a one-month ban on gasoline exports by large producers in order to stabilize wholesale prices ahead of the crop-sowing season, state news agency TASS reported on Friday. "Tighter supplies of exported Russian crude and gasoline has Middle East cash crude prices moving higher in the early trade today," said Dennis Kissler, senior vice president of trading at BOK Financial. Trump said he will announce on Monday 25% tariffs on all steel and aluminium imports into the U.S. A week ago he announced tariffs on Canada, Mexico and China, but suspended those for the neighbouring countries the next day. Tariffs could dampen global economic growth and energy demand. "The market has realized tariff headlines are likely to continue in the weeks and months ahead," said IG analyst Tony Sycamore, adding that there was an equal chance they could be walked back or even increased at some point in the near future. "So perhaps investors are coming to the conclusion it's not the best course of action to react negatively to every headline." China's retaliatory tariffs on some U.S. exports are due to take effect on Monday, with no sign yet of progress in talks between Beijing and Washington. Oil and gas traders are seeking waivers from Beijing for U.S. crude and liquefied natural gas (LNG) imports. Trump said on Sunday that the U.S. is making progress with Russia to end the Ukraine war. Russia's point man for relations with the U.S. said on Monday that all of President Vladimir Putin's conditions must be met in full before the war can end. Sanctions imposed on Russian oil trade on January 10 disrupted Moscow's supplies to its top clients, China and India. Washington also stepped up pressure on Iran last week, with the U.S. Treasury imposing new sanctions on a few individuals and tankers that help to ship Iranian crude oil to China. "These sanctions on Iran and Russia, they are biting. This is tightening the market," said SEB analyst Bjarne Schieldrop. Rising natural gas prices are also contributing to oil price gains by boosting demand for cheaper fuels, he added. Brent crude is forecast to average $60 to $65 a barrel in the second half of 2025 because Trump will be persistent in his desire to lower energy prices and he will ultimately prove to be a bearish influence on the market, Citi analysts said. Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here.
Yahoo
10-02-2025
- Business
- Yahoo
Oil prices advance despite concern over more US tariffs
By Anna Hirtenstein LONDON (Reuters) - Oil prices rebounded on Monday despite lingering fears over a potential global trade war after U.S. President Donald Trump's latest tariff plans, this time targeting steel and aluminium. Brent crude futures were up 87 cents, or 1.2%, at $75.53 a barrel by 1413 GMT. U.S. West Texas Intermediate crude added 1.3%, rising 90 cents to $71.90. Monday's gains could be down to bargain hunting after the market posted a third consecutive weekly decline last week, pressured by the concerns over global trade. "It's tariff uncertainty which is the name of the game. This affects risk appetite in general and has spillover effects into oil," said Harry Tchilinguiran at Onyx Capital. "After last week's declines, some people may be buying into the dip." Trump said he will announce on Monday 25% tariffs on all steel and aluminium imports into the United States. A week ago he announced tariffs on Canada, Mexico and China, but suspended those for the neighbouring countries the next day. There are concerns that tariffs could dampen global economic growth and energy demand. But in light of Trump's temporary backdown last week, investors appeared to be shrugging off the steel and aluminium tariff threat for now, said IG analyst Tony Sycamore. "The market has realised tariff headlines are likely to continue in the weeks and months ahead," he said, adding that there was an equal chance they could be walked back or even increased at some point in the near future. "So perhaps investors are coming to the conclusion it's not the best course of action to react negatively to every headline." China's retaliatory tariffs on some U.S. exports are due to take effect on Monday, with no sign yet of progress in talks between Beijing and Washington. Oil and gas traders are seeking waivers from Beijing for U.S. crude and liquefied natural gas (LNG) imports. Trump said on Sunday that the U.S. is making progress with Russia to end the Ukraine war, but he declined to provide details about any communications with Russian President Vladimir Putin. Sanctions imposed on Russian oil trade on January 10 disrupted Moscow's supplies to its top clients, China and India. Washington also stepped up pressure on Iran last week, with the U.S. Treasury imposing new sanctions on a few individuals and tankers that help to ship Iranian crude oil to China. "These sanctions on Iran and Russia, they are biting. This is tightening the market," said SEB analyst Bjarne Schieldrop. Rising natural gas prices are also contributing to oil price gains by boosting demand for cheaper fuels, he added. Brent crude is forecast to average $60 to $65 a barrel in the second half of 2025 because Trump will be persistent in his desire to lower energy prices and he will ultimately prove to be a bearish influence on the market, Citi analysts said. Sign in to access your portfolio
