Agencies Report:: Global gas and oil prices surged while stock markets across the world fell sharply as the Middle East conflict intensified, raising concerns about its duration and economic impact.
In the UK, gas prices hit their highest level in three years on Tuesday after significant gains on Monday, while Brent crude briefly exceeded $85 a barrel, a level last seen in July 2024. Major stock indexes in the US, Europe, and Asia also suffered losses.
Investors are assessing the economic consequences of the Israel and US airstrikes on Iran and Tehran’s retaliatory measures, including potential effects on inflation and interest rates.
Analysts fear that disruption in this critical energy and shipping region could mirror the impact of Russia’s full-scale invasion of Ukraine four years ago, which drove up global energy costs, reports BBC.
The UK’s Office for Budget Responsibility warned in its latest fiscal outlook that the conflict could severely affect both global and UK economies. German Chancellor Friedrich Merz, after meeting with US President Donald Trump at the White House, also expressed concern over possible economic damage, urging a swift end to the hostilities.
By Tuesday’s close, London’s FTSE 100 fell 2.75%, while Germany’s DAX and France’s CAC 40 dropped 3.44% and 3.46% respectively. In the US, the S&P 500 opened sharply lower but ended down 0.9%. In Asia, Japan’s Nikkei fell 3.3%, Hong Kong’s Hang Seng and China’s Shanghai Composite declined, and South Korea’s Kospi fell over 7% following Monday’s holiday closure.
UK gas prices rose above 165p per therm, a level last seen a year after the Ukraine war began, and closed at 138p, over 20% higher than Monday. Prices have doubled since the US and Israel began airstrikes on Iran. The spike followed QatarEnergy halting production after “military attacks” on its facilities, later suspending output of aluminium, methanol, and urea used in fertilizers.
Higher gas prices may increase household energy bills in the UK, though the impact is capped until July. Oil prices rose moderately, as crude can be sourced more flexibly, but higher fuel costs could still push up transport, food, and overall inflation, influencing central bank decisions on interest rates.
Shipping through the Strait of Hormuz, which carries about 20% of the world’s oil and gas, has largely stopped after attacks on vessels. Ebrahim Jabbari, adviser to Iran’s Islamic Revolutionary Guard Corps chief, warned ships against entering the region. Supertanker freight rates from the Middle East to China hit a record $400,000 per day, nearly double last week’s rate.
Logistics experts say insurance risks and carrier hesitancy have effectively closed the Strait of Hormuz, likely driving global shipping rates higher. UK consumers may face increased fuel prices if crude remains elevated, according to Alasdair Locke, chairman of Motor Fuel Group.
