Asia: Market trade lower; oil prices spike after US strikes on Iran
[TOKYO] Oil prices surged and Asian markets traded lower on Monday on concerns of disruption to energy markets after US air strikes on Iran's nuclear facilities.
The dollar strengthened as traders assessed the weekend's events, with Iran threatening US bases in the Middle East as fears grow of an escalating conflict in the volatile region.
Iran is the world's ninth-biggest oil-producing country, with output of about 3.3 million barrels per day.
It exports just under half of that amount and keeps the rest for domestic consumption.
If Tehran decides to retaliate, observers say one of its options would be to seek to close the strategic Strait of Hormuz - which carries one-fifth of global oil output.
When trading opened on Monday, Brent and the main US crude contract WTI both jumped more than four per cent to hit their highest price since January.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
They pared these gains however and later in the morning Brent was up 2.1 per cent at US$75.43 per barrel and WTI was 2.1 per cent higher at US$78.64.
Economists at MUFG warned of 'high uncertainty of the outcomes and duration of this war', publishing a 'scenario analysis' of an oil price increase of US$10 per barrel.
'An oil price shock would create a real negative impact on most Asian economies' as many are big net energy importers, they wrote, reflecting the market's downbeat mood.
Tokyo's key Nikkei index was down 0.6 per cent at the break, with Hong Kong losing 0.4 per cent and Shanghai flat. Seoul fell 0.7 per cent and Sydney was 0.8 per cent lower.
'Extreme route'
The dollar's value rose against other currencies but analysts questioned to what extent this would hold out.
'If the increase proves to be just a knee-jerk reaction to what is perceived as short-lived US involvement in the Middle-East conflict, the dollar's downward path is likely to resume,' said Sebastian Boyd, markets live blog strategist at Bloomberg.
US Defence Secretary Pete Hegseth said Sunday that the strikes had 'devastated the Iranian nuclear programme', though some officials cautioned that the extent of the damage was unclear.
It comes after Israel launched a bombing campaign against Iran earlier this month.
Chris Weston at Pepperstone said Iran would be able to inflict economic damage on the world without taking the 'extreme route' of trying to close the Strait of Hormuz.
'By planting enough belief that they could disrupt this key logistical channel, maritime costs could rise to the point that it would have a significant impact on the supply of crude and gas,' he wrote.
At the same time, 'while Trump's primary focus will be on the Middle East, headlines on trade negotiations could soon start to roll in and market anxieties could feasibly build'. AFP
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
an hour ago
- Straits Times
China warns of ‘spillover of war' risk in Iran-Israel conflict
Beijing said the international community must do more to prevent fighting between Iran and Israel from impacting the global economy. PHOTO: AFP Follow our live coverage here. BEIJING - China urged Iran and Israel on June 23 to de-escalate in order to prevent the 'spillover' of their war, as fighting between the two foes raged for the 11th day. 'The Chinese side urges the parties to the conflict to prevent the situation from escalating repeatedly, resolutely avoid the spillover of war, and return to the path of political resolution,' foreign ministry spokesman Guo Jiakun said. Aerial assaults raged between Iran and Israel early on June 23 while Tehran vowed retaliation over the bunker-buster bombs American warplanes unleashed at the weekend on three nuclear sites. US Secretary of State Marco Rubio urged China on June 22 to help deter Iran from shutting down the Strait of Hormuz, a crucial trade route, following American strikes on Iranian nuclear sites. Beijing on June 22 said the international community must do more to prevent fighting between Iran and Israel from impacting the global economy, noting the 'Persian Gulf and surrounding waters are important international trade routes'. 'Maintaining security and stability in this region is in the common interests of the international community,' the foreign ministry's Mr Guo said. 'China calls on the international community to make greater efforts to promote the de-escalation of the conflict and prevent regional instability from having a greater impact on global economic development,' he added. AFP Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
an hour ago
- Business Times
Asia's reliance on Middle Eastern oil laid bare by Iran attacks
[PARIS] Oil buyers and traders across Asia are watching the escalation of a conflict around Iran with bated breath, as the top importing region braces for the impact of any disruption of exports from the Persian Gulf. Asia buys more than four-fifths of all the crude produced in the Middle East, and 90 per cent of that goes through the Strait of Hormuz, according to data from Kpler. Here are three key concerns for the Asian market as the conflict expands: The Iran-China link China, the world's largest oil refiner, gets about 14 per cent of its crude from Iran, Kpler data show. Actual flows are likely higher, with some imports from the Islamic Republic masked as shipments from not just Malaysia, but also the United Arab Emirates and Oman, in order to circumvent US sanctions. While China's larger state-owned processors seek to avoid breaching the bans, the country does not as a whole recognize unilateral US sanctions. And these discounted flows are vital for a hard-pressed private refining sector. There's growing concern those shipments could be disrupted. That has boosted demand for crude that can load on the Indian Ocean side of the Strait, including Abu Dhabi's Murban and Omani crude. Other grades that may benefit from any threat to Iranian flows are Russian ESPO, which loads from the Far East port of Kozmino, as well as Angolan varieties. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Iran's fuel exports Iran does not just ship crude – it is also a sizable exporter of fuel oil, selling mostly high-sulfur varieties used for shipping or as refinery feedstocks. Much of that supply eventually finds its way into ship-refueling hubs including Fujairah in the UAE, Singapore and Malaysia. The so-called straight-run fuel oil that can replace crude is typically exported to the relatively simple, low-margin processors in China known as teapots. Iran also has a lot of natural gas – sharing one of the world's largest deposits with Qatar. While the Islamic Republic uses most of that domestically, it sells by-products including liquefied petroleum gas and condensates internationally. China's giant plastics sector relies on Iran for almost a quarter of its imports of LPG, which can be used for cooking and heating but also processed into petrochemicals used as plastic building blocks. That relationship has only intensified after flows from the US, traditionally China's largest supplier, collapsed because of trade conflicts earlier this year. 'If there is a complete stoppage of Iranian LPG material or even, say, a halving of the average intake to China, China has few alternatives of substance,' said Samantha Hartke, head of market analysis for the Americas at Vortexa. Iran's influence on key shipping routes The vast majority of Asia's imports come through the Strait of Hormuz, making this waterway a focus for oil merchants. While Iran may choose not to block the conduit, it's also able to threaten the safety of navigation through the Red Sea – the shortest route between Asia and Europe – using proxies such as Yemen's Houthis. About 9 per cent of global seaborne trade normally passes through the Bab el-Mandeb chokepoint, or more than US$2 trillion worth of goods a year. That may affect Asia's supply from Russia, which has turned to markets in the East after being increasingly shunned by the US and traditional buyers in Europe because of its invasion of Ukraine in 2022. Ships carrying those massive volumes – ranging from flagship Urals crude to naphtha – must decide whether they continue to risk the Red Sea route, or face weeks of delays by going around South Africa instead. BLOOMBERG
Straits Times
an hour ago
- Straits Times
Airlines weigh Middle East cancellations after US strikes in Iran
Commercial airlines around the world on June 23 were weighing how long to suspend Middle East flights after the US struck Iran. PHOTO: EPA-EFE Follow our live coverage here. DUBAI - Commercial airlines around the world on June 23 were weighing how long to suspend Middle East flights as a conflict which has already cut off major flight routes entered a new phase after the US attacked key Iranian nuclear sites and Tehran vowed to defend itself. The usually busy airspace stretching from Iran and Iraq to the Mediterranean has been largely empty of commercial air traffic for 10 days since Israel began strikes on Iran on June 13, as airlines divert, cancel and delay flights through the region due to airspace closures and safety concerns. New cancellations of some flights by international carriers in recent days to usually resilient aviation hubs like Dubai, the world's busiest international airport, and Qatar's Doha, show how aviation industry concerns about the region have escalated. However, some international airlines were resuming services on June 23 . Leading Asian carrier Singapore Airlines, which described the situation as 'fluid', was set to resume flying to Dubai on June 23 after cancelling its June 22 flight from Singapore. Similarly, Flightradar24 departure boards show British Airways, owned by IAG, was set to resume Dubai and Doha flights on June 23 after cancelling routes to and from those airports on Sunday. Air France KLM cancelled flights to and from Dubai and Riyadh on June 22 and June 23 . With Russian and Ukrainian airspace also closed to most airlines due to years of war, the Middle East had become a more important route for flights between Europe and Asia. Amid missile and air strikes during the past 10 days, airlines have routed north via the Caspian Sea or south via Egypt and Saudi Arabia. Added to increased fuel and crew costs from these long detours and cancellations, carriers also face a potential hike in jet fuel costs as oil prices rise following the US attacks. Airspace risks Proliferating conflict zones are an increasing operational burden on airlines, as aerial attacks raise worries about accidental or deliberate shoot-downs of commercial air traffic. Location spoofing and GPS interference around political hotspots, where ground-based GPS systems broadcast incorrect positions which can send commercial airliners off course, are also a growing issue for commercial aviation. Flightradar24 told Reuters it had seen a 'dramatic increase' in jamming and spoofing in recent days over the Persian Gulf. SkAI, a Swiss company that runs a GPS disruption map, late on June 22 said it had observed more than 150 aircraft spoofed in 24 hours there. Safe Airspace, a website run by OPSGROUP, a membership-based organisation that shares flight risk information, noted on June 22 that US attacks on Iran's nuclear sites could heighten the threat to American operators in the region. This could raise additional airspace risks in Gulf states like Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, it said. In the days before the US strikes, American Airlines suspended flights to Qatar, and United Airlines did the same with flights to Dubai. They have yet to resume. While international airlines are shying away from the region, local carriers in Jordan, Lebanon and Iraq are tentatively resuming some flights after widespread cancellations. Israel is ramping up flights to help people return home, and leave. The country's Airports Authority says that so-called rescue flights to the country would expand on June 23 with 24 a day, although each flight would be limited to 50 passengers. From June 23 , Israeli airlines will start to operate outbound flights from Israel, the authority said. Israeli airline El Al on June 22 said it had received applications to leave the country from about 25,000 people in about a day. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
