Rising Oil Prices Trigger Global Market Reaction

Crude Oil Prices Surge After Tanker Attacks in Strait of Hormuz and Iraqi Waters​

Oil Markets Rally Sharply Amid Escalating Tensions​

Crude oil prices surged on Thursday after reports of additional tanker attacks in the Strait of Hormuz and Iraqi waters intensified fears of supply disruptions, fueling global inflation concerns and pushing borrowing costs higher.

US crude, also known as West Texas Intermediate, climbed 7.5% to $93.80 per barrel, extending an overnight rise of more than 4%. Brent crude futures also recorded a sharp increase, jumping 7.7% to $99.03 per barrel.

The price surge came despite efforts by the International Energy Agency to stabilize the market through a large-scale release of strategic reserves.

Record Strategic Oil Release Announced​

The International Energy Agency confirmed plans to release 400 million barrels of oil from emergency reserves, marking the largest coordinated release in its history.

As part of this initiative, the United States announced that it would release 172 million barrels of oil starting next week. The move aims to increase supply in the market and counter the rapid rise in energy prices triggered by escalating geopolitical tensions.

However, the announcement failed to calm markets as fresh attacks on oil infrastructure raised concerns about potential disruptions to global supply.

Tanker Attacks Reported Near Iraq’s Oil Export Routes​

Security officials in Iraq reported that two fuel tankers were attacked in Iraqi waters by Iranian boats carrying explosives early on Thursday.

An Iraqi official also stated that oil ports in the region had completely stopped operations following the incident.

According to reports, several tankers carrying Iraqi crude were engulfed in flames in the Persian Gulf near Basra, with burning oil leaking into the water. Market analysts indicated that the attacks appear to be a forceful response to the strategic reserve release announcement.

Iran had earlier intensified operations against merchant vessels in the Strait of Hormuz and warned that oil prices could climb to $200 per barrel.

On Wednesday, three vessels were reportedly hit in Gulf waters after Iran’s Revolutionary Guards stated their forces had fired on ships that had ignored their orders in the region.

Global Markets React to Energy Price Shock​

The sharp rise in oil prices weighed heavily on global equity markets. MSCI’s broadest index of Asia-Pacific shares outside Japan declined by 0.8%.

Japan’s Nikkei index fell by 1.6%, reflecting concerns over higher energy costs, as the country is a major importer of oil and natural gas.

Inflation Concerns Grow as Bond Yields Rise​

Recent economic data showed the US consumer price index increased by 0.3% in February, slightly higher than January’s 0.2% rise and in line with market expectations. However, the escalation in energy prices has intensified fears that inflation could accelerate further.

In bond markets, the prospect of rising inflation pushed yields higher globally. Yields on 10-year US Treasury notes rose by 4 basis points to 4.2472% on Thursday, after gaining 6 basis points in the previous session.

Interest Rate Expectations Shift​

Fed funds futures continued to slide as investors worried that higher inflation driven by energy costs could limit the Federal Reserve’s ability to ease monetary policy.

Markets are currently pricing in only one additional rate cut from the Federal Reserve this year.

The risk of energy-driven inflation has also shifted expectations in Europe, where markets are now betting that the European Central Bank’s next move in interest rates could be an increase, possibly as early as June.

Currency Markets Reflect Rising Risk Aversion​

Amid heightened uncertainty, investors moved toward the US dollar while avoiding currencies from major energy-importing economies.

The euro slipped 0.3% to $1.1536, reaching its weakest level since November last year. The dollar edged up 0.1% to 159.12 yen, marking its strongest level since January.

Meanwhile, the Australian dollar declined 0.4% to $0.7127 after previously reaching a more than three-year high of $0.7188 on Wednesday, as expectations of a near-term rate hike from Australia’s central bank had strengthened earlier.