Oil soars 8.5pc as Israel strikes Iran in major escalation

By News Desk

LONDON: Oil prices soared and stocks sank on Friday after Israel launched strikes on nuclear and military sites in Iran, stoking fears of a full-blown war.

Oil futures rocketed more than 13 per cent at one point, reaching the highest levels since January and reigniting worries about a renewed spike to inflation.Fears of a higher-cost environment sent share prices sliding for a majority of companies across Asia and Europe.

Energy majors jumped, however, as despite a pullback heading into the Wall Street open, crude was still up by around 8.5 per cent.Brent crude futures were up $4.94, or 7.12 per cent, to $74.3 a barrel at 1442 GMT, after hitting an intraday high of $78.5, the strongest level since January 27, Reuters reported.

The dollar jumped, while gold -- viewed as a safe haven investment -- was close to its record high of above $3,500 an ounce set in April.“Global markets are being rattled by an escalation of Middle East tensions,” noted Richard Hunter, head of markets at trading group Interactive Investor.

“Asian markets were the first to react to the news overnight, with (stock market) declines across the board.” Europe followed suit, with almost all the continent’s stock indices in negative territory nearing the half-way stage.

Iran called Israel’s wave of strikes a “declaration of war”, after the Israeli military hit about 100 targets including nuclear facilities and killed senior figures, among them military chiefs and top nuclear scientists.

US President Donald Trump told Fox News he had prior knowledge of the Israeli strikes, which Israel said involved 200 fighter jets.Trump also stressed that Tehran “cannot have a nuclear bomb”.

Iran’s supreme leader Ayatollah Ali Khamenei warned Israel it faced a “bitter and painful” fate over the attacks, while the Iranian military said there were “no limits” to its response.

“The big fear for investors is that an escalation to the tensions will not only raise the risk of a prolonged conflict, but it could disrupt Iranian oil production,” said Matthew Ryan, head of market strategy at global financial-services firm Ebury.

“We suspect that safe haven assets will be well supported in the coming days, as markets brace for additional retaliatory attacks and the possibility of a wider conflict.” Ryan added in a client note that “the spike in oil prices has broader implications, as it could both weigh on the global growth outlook and keep inflationary pressures higher for longer, which complicates the easing cycle among the world’s major central banks”.