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Oil prices surged on Monday after US and Israeli strikes on Iran plunged the Middle East into conflict, disrupting the supply of crude from the region.
In the first trading session since the attacks on Iran began, Brent crude, the international benchmark, soared as much as 13 per cent to $82.37 a barrel before giving up some of those gains to trade up 7 per cent in London.
Activity in the Strait of Hormuz, the narrow waterway at the mouth of the Gulf through which a fifth of the world’s oil and gas flows, has slowed to a near standstill following the strikes.
Tehran’s retaliatory strikes on its Gulf neighbours also threaten regional infrastructure that is critical to the global energy market.
“The implications of this conflict for the world economy depend on the flow of oil and gas through the Strait of Hormuz,” said Norbert Rücker, head of economics at Julius Baer.
“The most feared scenario is not its closure, but serious damage to the region’s key oil and gas infrastructure.”
Gold prices rose 1.6 per cent to $5,362 a troy ounce, as investors sought haven assets. The dollar rose 0.4 against a basket of its key trading partners.
Futures tracking the S&P 500 indicated the index would drop 0.8 per cent when Wall Street reopens on Monday. Futures for the Nasdaq 100 were steady.
Stock markets across Asia declined on Monday with Japan’s Topix and Hong Kong’s Hang Seng index down 1.5 per cent and 1.4 per cent, respectively.