Brent Oil Heads for Record Monthly Surge as Stocks Remain in Limbo

Economic Times

Image showing oil barrels, stocks, and oil fields.

Brent crude rose by 2% on Monday and remained on course for a record monthly increase, as global stock markets hovered in uncertainty amid fears that a Gulf conflict could drive inflation higher and raise the risk of a worldwide recession.

Shares across Asia—where economies are more dependent on Gulf oil exports—declined, with Japan’s Nikkei index closing 2.8% lower. European stocks recovered some losses, while Wall Street futures pointed to modest gains following a recent sell-off.

Investors were weighing mixed signals. US President Donald Trump issued a fresh warning to Iran on social media, urging it to reopen the Strait of Hormuz or face potential US strikes on its oil infrastructure and power facilities.

Meanwhile, Pakistan said it was preparing to host “meaningful talks” aimed at ending the conflict in the coming days, even as Tehran accused Washington of preparing a possible ground offensive while increasing its military presence in the region.

“Oil is the lightning rod right now,” said ⁠Eren Osman, managing director of wealth management at Arbuthnot Latham, adding that a reopening of the Strait of Hormuz was the key to calming world markets.

“The biggest challenge for us as investors today is that you’ve got one of the widest ranges of potential outcomes,” he said, adding he did not expect a prolonged conflict as he believed Trump had a "pain threshold" for market losses.

Madison Cartwright, Senior Geo-economics Analyst at the Commonwealth Bank of Australia, said Iran’s control of the Strait of Hormuz—through which around one-fifth of global oil and liquefied natural gas supplies pass—gives it little incentive to back down, adding that the bank expects the conflict to continue until at least June.

The disruption to the Strait has driven sharp increases in the prices of oil, gas, fertiliser, plastics and aluminium, as well as aviation and shipping fuel. Costs for food, pharmaceuticals and petrochemical products are also expected to rise.

Aluminium prices surged to four-year highs following Iranian airstrikes on two major Middle Eastern producers over the weekend.

The developments have weighed particularly heavily on Asian markets, with MSCI’s broadest index of Asia-Pacific shares outside Japan falling by 1.8%.

In contrast, European stocks were last up 0.6%, while futures for the S&P 500 and Nasdaq indicated similar modest gains.

"The ‌longer the ⁠Strait remains closed, the sharper the drawdown in buffer supplies that could spark dramatic increases in the price of crude oil, natural gas and other commodities," warned Bruce Kasman, global head of economics at JPMorgan.

"A scenario in which the Strait remains closed for an additional month would be consistent with oil prices rising towards $150 a barrel and constraints on industrial consumers of energy supply."

Brent crude rose by 2% to $114.85 a barrel, putting it on course for a 59% gain in March—surpassing the monthly surge recorded after Iraq’s invasion of Kuwait in 1990. US crude also climbed 1.5% to $101.16.

Rising inflation concerns have prompted investors to revise upwards their expectations for interest rates globally. Jerome Powell is due to speak later on Monday, alongside John Williams, offering further insight into the Federal Reserve’s outlook.

Upcoming data on US retail sales, manufacturing and payrolls are expected to provide a clearer picture of the strength of the economy.

The energy shock, combined with mounting fiscal pressures from higher borrowing costs and increased defence spending, has weighed on sovereign bond markets. Yields on 10-year US Treasury bonds were last at 4.372%.

Heightened market volatility has supported the US dollar, benefiting from its status as the world’s most liquid currency. The United States’ position as a net energy exporter has also given it a relative advantage over Europe and much of Asia.

The dollar index was trading near a 10-month high at 100.25, broadly unchanged on the day.

However, renewed warnings of possible intervention by Japanese authorities led the dollar to ease by 0.5% to 159.5 yen, after surpassing the 160 level last week for the first time since July 2024—when Japan last intervened to support its currency.

The euro slipped 0.1% to $1.1493, remaining close to its March low of $1.1409.

In commodity markets, gold rose 1.1% to $4,542 per ounce, although it has recently seen limited demand as a safe-haven asset or hedge against inflation risks.

Source: Reuters



PUKMEDIA