Amid escalating Middle Eastern conflict, oil prices have surged significantly, marking the largest weekly increase in over a year.
- Brent crude climbed by 0.8% on Friday, reaching $78.24, close to the $80 mark last touched in August.
- West Texas Intermediate (WTI) saw a 0.75% increase, contributing to a 9% weekly rise in oil prices.
- Escalating tensions between Israel and Hezbollah, coupled with Iran’s significant military actions, have intensified market fears.
- Share prices of major oil companies have risen, while the airline sector suffers from increased fuel costs.
Oil prices experienced their largest weekly surge in over a year, spurred by escalating tensions between Israel and Hezbollah. The financial markets reacted as Brent crude, the international benchmark, rose by 0.8% on Friday to reach $78.24 per barrel. This marked a 9% weekly increase, bringing it near the $80 threshold last seen in August. Similarly, West Texas Intermediate (WTI) climbed by 0.75% to $74.26 per barrel by week’s end.
The price hikes are driven by increasing concerns over potential disruptions in oil supply due to geopolitical tensions. The situation exacerbated as Iran launched nearly 200 ballistic missiles at Israel, representing the most significant direct military action to date, elevating fears of a more extensive regional conflict. The United States and Israel have responded with warnings of ‘severe consequences,’ and there are reports of discussions regarding potential retaliatory actions against Iranian oil facilities.
Previously, oil prices were on a downward trend due to global demand concerns and a potential increase in supply. The Organisation of the Petroleum Exporting Countries (Opec) had decided to resume production in December, planning a gradual increase of 180,000 barrels per day. However, these geopolitical developments have overshadowed such prospects, drawing attention back to potential supply interruptions.
The market reaction has been swift, with major oil companies benefitting from the price rally. Shares of Shell increased by 0.5% to £25.77½, and BP saw a 1.9% rise to 416¾p, with both companies experiencing over 5% gains throughout the week. In contrast, the airline industry has faced negative impacts due to rising fuel costs. London-listed airlines like Wizz Air and easyJet observed significant declines in their share prices, with Wizz Air dropping 3.7% to £12.74 and easyJet falling by 2.6% to 493p.
Such fluctuations have also sparked broader economic implications, including inflation concerns. The yield on 10-year UK government bonds reached 4.07%, the highest since July. Furthermore, gold prices, a traditional safe haven during geopolitical unrest, increased to $2,657.86 per troy ounce, reflecting investor caution amid the ongoing uncertainty globally.
As the Middle Eastern tensions continue to unfold, the oil market remains volatile, with significant implications for global economies.
