Oil Prices Surge Amid Iran Tensions, Rattling Global Markets
By Stan Choe
NEW YORK (AP) — Global stock markets tumbled Wednesday as escalating tensions in the Middle East sent oil prices soaring, fueling fears of renewed inflation and complicating economic forecasts. The surge in oil prices comes as the U.S. and its allies brace for potential retaliatory attacks from Iran following recent strikes linked to both countries.
The S&P 500 fell 0.6 percent, poised for its first weekly decline, while the Dow Jones Industrial Average dropped 0.8 percent, losing 380 points. The Nasdaq composite also edged lower, down 0.6 percent.
Brent crude, the international benchmark, jumped 4.7 percent to $108.27 a barrel. U.S. oil prices rose 1.5 percent to $97.61 per barrel. The price hikes are directly linked to disruptions in the Persian Gulf’s energy industry, following threats from Iran to target oil and gas infrastructure in Qatar, Saudi Arabia, and the United Arab Emirates. Iranian state television reported Wednesday that the Islamic Republic would be attacking facilities after an attack on its offshore South Pars natural gas field.
“Oil and natural gas prices have been spiking since the war began,” said analysts at ING Bank, noting that roughly a fifth of the world’s crude oil passes through the Strait of Hormuz, which has seen increased restrictions on vessels linked to the U.S., Israel, and their allies.
The rising energy costs are exacerbating existing inflationary pressures. U.S. wholesale inflation unexpectedly accelerated in February, climbing to 3.4 percent, a figure released Wednesday morning. This raises concerns that producers will pass those costs onto consumers.
The Federal Reserve held interest rates steady Wednesday, projecting higher inflation and only one rate cut for the year, acknowledging the economic risks stemming from the conflict. Fed Chair Jerome Powell is scheduled to speak later today.
“Interest rate cuts would give the job market and investment prices a boost, but would also worsen inflation,” analysts noted.
The Australian sharemarket is expected to decline Thursday, with futures pointing to a 1 percent loss at the open. The Australian dollar was trading at US70.21¢.
Despite the broader market downturn, some companies reported positive earnings. Macy’s jumped 5.2 percent after exceeding analysts’ expectations for profit and revenue. General Mills, however, slipped 1 percent after reporting a weaker-than-expected profit.
The situation remains fluid, and economists caution that forecasting is particularly difficult given the unpredictable nature of the conflict. The average price for a gallon of gasoline in the U.S. has already spiked to $3.84, up from under $3 last month.
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