Brent Oil Rises as Hormuz Crisis Shakes Global Markets

Brent oil moved higher as tensions around the Strait of Hormuz continued to disrupt shipping and tighten energy supply chains. The uncertainty pushed investors to scale back expectations for interest-rate cuts, with markets now leaning toward further tightening from the Federal Reserve, ECB, Bank of England and Riksbank. The Australian dollar faces pressure as diesel shortages threaten mining and farming activity. Global markets remain choppy as discussions over naval escorts for shipping continue.

Equities

The FTSE 100 fell 0.4% on Friday, marking a second consecutive weekly loss as rising oil prices linked to the Middle East conflict clouded the outlook for interest rate cuts from the Bank of England. The FTSE 250 also declined 0.4% during the session. Fresh economic data added to the cautious tone after figures showed the UK economy stalled in January, with GDP recording zero growth when economists had expected a modest expansion. The figures suggested economic momentum had weakened even before the recent escalation in energy prices.

Among major UK-listed companies, energy stocks moved higher alongside crude prices. BP closed 0.9% higher on Friday while Shell gained 1.1%, supported by Brent crude rising above $100 per barrel for the first time since August 2022. Oil prices strengthened as the conflict involving Iran raised concerns about disruptions to global energy supply routes, particularly through the Strait of Hormuz.

Banking shares with exposure to the Middle East declined. HSBC closed 1.2% lower on Friday as investors assessed the impact of regional instability on its operations and investment activity in Gulf financial hubs. Standard Chartered dropped 3.2% during the same session as its significant presence in the region left the bank exposed to the economic fallout from the conflict.

US markets also closed lower on Friday. The Dow Jones Industrial Average fell 0.26% to 46,558.47, the S&P 500 declined 0.61% to 6,632.19 and the Nasdaq Composite dropped 0.93% to 22,105.36. The Russell 2000 small-cap index ended the session at its lowest level of the year so far.

Among individual companies, Adobe closed 7.6% lower on Friday after it was announced that long-time chief executive Shantanu Narayen will step down once a successor is appointed. The announcement renewed concerns about how the company will respond to rapid developments in artificial intelligence within the software industry.

Meta Platforms also declined, closing 3.8% lower on Friday after reports that the company had delayed the release of its artificial intelligence model known as Avocado until at least May. The postponement raised questions about the pace of Meta’s AI development plans.

Forex & Commodities

The US dollar eased slightly early on Monday after reaching a ten-month high late last week, as traders prepared for a busy week of central bank decisions while the Middle East conflict continues to influence energy prices and inflation expectations. The euro strengthened modestly to $1.1440 after touching a multi-month low earlier in the session. Sterling also edged higher to $1.3253, recovering slightly after weakening late last week. The dollar index slipped to 100.29 but remained close to recent highs. Meanwhile the Japanese yen stayed weak near ¥159.4 per dollar, reflecting concerns about Japan’s heavy reliance on imported energy. The Australian dollar strengthened to $0.7010 early Monday as markets increased expectations that the Reserve Bank of Australia will raise interest rates again at its policy meeting on Tuesday.

Gold prices were steady in early Monday trading. Spot gold traded near $5028 per ounce after briefly touching a three-week low earlier in the session. The softer US dollar provided some support for bullion while investors assessed the outlook for monetary policy ahead of the Federal Reserve’s meeting later this week. Policymakers are expected to keep interest rates unchanged when the meeting concludes on Wednesday, though rising energy costs linked to the Middle East conflict continue to complicate the outlook for inflation.

Oil prices continued to rise as risks to Middle East supply remained in focus. Brent crude climbed to about $105.9 per barrel early Monday while US West Texas Intermediate traded around $100.4 per barrel. The surge follows the shutdown of shipping through the Strait of Hormuz and recent strikes near Iran’s Kharg Island export hub, a key route for global crude supplies.