Oil prices surged sharply and global markets tumbled on Thursday after former US President Donald Trump warned in a televised address that Iran would be hit “extremely hard” in the coming weeks, extinguishing hopes of a near-term resolution to the Middle East conflict.
Brent crude climbed 8% to surpass $109 a barrel, rebounding from Wednesday’s brief dip below $100 on investor optimism over a potential de-escalation. U.S. West Texas Intermediate (WTI) also rose sharply, mirroring the jump in the international benchmark.
Equity markets across Asia and Europe were hit hard. Japan’s Nikkei index dropped 2.4%, China’s CSI 300 fell 1.36%, and South Korea’s Kospi plunged 4.8%. In Europe, Germany’s DAX fell 2%, France’s CAC 40 dropped 1.15%, and Italy’s FTSE MIB declined 1.45%. London’s FTSE 100 opened 0.7% lower but later recovered to roughly unchanged levels, buoyed by a surge in fossil fuel shares; BP and Shell rose 4.5% and 3.1%, respectively.
Government bond yields also climbed amid fears of rising inflation from higher energy costs. The yield on 10-year UK gilts increased four basis points to 4.886%, while two-year yields rose six basis points to 4.36%.
Chris Beauchamp, chief market analyst at IG, said markets were struggling to absorb the implications of Trump’s warning. “Instead of easing tensions, Trump signaled heavier strikes and a fresh warning on power plants,” he said. “Markets now price in hundreds of millions of barrels of oil that won’t reach global supply soon, pushing the economy toward potential catastrophe.”
The US dollar strengthened 0.6% against a basket of major currencies as investors sought safe havens, pushing the pound down almost a cent to $1.321, reversing Wednesday’s gains.
The surge in oil prices is already affecting consumers. In the UK, the Bank of England warned that 1.3 million more homeowners could face higher mortgage payments due to financial shocks linked to the Iran conflict.
Meanwhile, data from the RAC showed petrol and diesel prices jumped by a record amount in March. The average price of a litre of unleaded petrol rose by 20p, from 132.83p on 01 March to 152.83p by the end of the month, surpassing the previous record monthly jump of 16.6p in June 2022, following Russia’s invasion of Ukraine.
With global energy markets remaining highly volatile, analysts warn that consumers and businesses worldwide may face further cost pressures if tensions in the Middle East escalate further.
