Gulf stock markets advance despite regional conflict
June 23 (Reuters) - Major stock markets in the Gulf advanced in early trade on Monday amid rising oil prices, as investors anxiously waited to see if Iran would retaliate against U.S. attacks on its nuclear sites.
Oil prices jumped to their highest since January as the United States' weekend move to join Israel in attacking Iran's nuclear facilities stoked supply concerns.
Market participants expect further price gains amid mounting fears that an Iranian retaliation may include closing the Strait of Hormuz, through which roughly a fifth of global crude supply flows.
Saudi Arabia's benchmark index (.TASI), opens new tab gained 0.7%, with Al Rajhi Bank (1120.SE), opens new tab rising 0.6% and Saudi Arabian Mining Company (1211.SE), opens new tab putting on 2%.
Regional stock markets were recovering to a certain extent as investors could see U.S. intervention potentially forcing Iran into peace talks, said Hani Abuagla, senior market analyst at XTB MENA.
Dubai's main share index (.DFMGI), opens new tab advanced 1%, led by a 2.4% jump in blue-chip developer Emaar Properties (EMAR.DU), opens new tab and a 1.7% increase in sharia-compliant lender Dubai Islamic Bank (DISB.DU), opens new tab.
Gulf states, home to multiple U.S. military bases, were on high alert on Sunday, with their leaders calling on all parties to exercise maximum restraint following U.S. strikes on Iran that raised the possibility of a wider conflict.
Nuclear authorities in Saudi Arabia and the UAE said they had not detected signs of nuclear contamination following the strikes in Iran.
The Abu Dhabi index (.FTFADGI), opens new tab added 0.2%.
According to Abuagla, most markets have already recorded a significant selloff, while some investors might have priced in a worst-case outcome. As a result, the market could see a normalization if current conditions did not change too much.
In Qatar, the index (.QSI), opens new tab climbed 1.3%, with the Gulf's biggest lender Qatar National Bank (QNBK.QA), opens new tab rising 0.8% and Qatar International Islamic Bank (QIIB.QA), opens new tab leaping 3.6%.
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The Guardian
38 minutes ago
- The Guardian
Reeves calls for Middle East de-escalation amid oil price fears
Rachel Reeves has called for de-escalation of the conflict in the Middle East, warning that rising global oil prices could hit the UK economy as she unveiled Labour's long-awaited industrial strategy. Launching the policy package at an engineering business in Nuneaton alongside Keir Starmer and the business secretary, Jonathan Reynolds, Reeves acknowledged the potential impact on companies of the conflict. 'We want de-escalation because it's the right thing for the Middle East, but we also want de-escalation because of the ramifications of conflict in the Middle East for the rest of the world, including the UK,' the chancellor said. 'We have seen increases in oil prices, in recent days, and weeks, which of course, will have an impact on the UK economy,' she added. 'We recognise the challenge that businesses and families faced with energy costs, which is part of the reason why we're doing what we're doing today, but also why, for example, we've extended the warm homes discount to try and take money off people's energy bills.' Reeves also said she understood US concerns about the risk of Iran developing a nuclear capability, saying: '60% enrichment of uranium is not for civil nuclear. And we've long shared those concerns.' As part of the industrial strategy, the government has announced a new scheme aimed at cutting the electricity bills of energy-intensive businesses, to come into force from 2027. Reynolds said the energy plan would bring the UK from being an 'outlier' in Europe on energy prices 'right into the middle of the pack'. Energy-intensive businesses in Britain have long complained that their electricity bills are uncompetitively high. Reynolds and Reeves said the government intended to fund the scheme by spreading the costs of the 'contracts for difference' through which it pays for renewable energy generation out over a longer period and earmarking increased future revenue from the emissions trading scheme from rising carbon prices. 'We are talking about a major shift in competitiveness for the sectors covered by the new British industrial competitiveness scheme: it moves us from being an outlier right into the middle of the pack – cheaper than Italy, Czech Republic, broadly comparable to, say Germany,' Reynolds said. He added: 'There's no increase in bills for anybody else and no implications for tax or borrowing from these policy interventions by the energy department that will create the headroom to allow us to exempt these businesses.' The business secretary also emphasised the cross-Whitehall nature of the industrial strategy, which covers eight sectors the government sees as having potential for significant growth – including advanced manufacturing, financial services and the creative industries. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion The government published separate plans for five of the eight sectors on Monday, alongside the industrial strategy, with three more – life sciences, defence and financial services – expected before parliament goes into recess next month. 'This has got real, significant interventions in it that are not only very important in their own right, they do get to the core of what I wanted, what we wanted, which is, you know, this is not the Department for Business and Trade or the Treasury industrial strategy, this is the British government's industrial strategy,' he said. Reynolds also highlighted a new approach on preparing strategic sites for investment, the significant increase in the budget for the taxpayer-backed British Business Bank announced at the recent spending review and more powers for metro mayors to shape economic development.
The Independent
an hour ago
- The Independent
How will your household costs be affected by conflict in the Middle East?
Donald Trump's decision for the US to bomb Iran has seen fears of a crisis in the Middle East deepen, with the world braced for a counter attack from Tehran. In one retaliatory move, the country has already voted to shut down a key shipping route, the Strait of Hormuz, prompting warnings of another spike in oil prices. The price of oil has been on the rise over the past three weeks – amid Israel strikes on Iran's nuclear sites – but there are concerns it could rocket even further, with one expert warning of a possible 40 per cent increase. As well as the effect on the price of gas and petrol, any move from Iran to close the shipping route could also affect the likes of transport, production and inflation domestically. Why do oil prices rise and fall? When talking about the price of oil, what we're typically looking at in the UK is Brent Crude, which relates to oil from the North Sea and is a worldwide benchmark of future prices of oil across most markets. There are others, such as WTI, but Brent is typically the focus. Brent was above $122 per barrel in 2022, a result of the Russian invasion of Ukraine which resulted in far higher energy costs, while the price was as low as $25 in mid-2020 when the Covid lockdown meant demand was incredibly low. Right now, it's just under $78. Like any market, a commodity like oil is primarily subject to supply and demand. Too much supply will lower prices so businesses buy it up; if there's more demand, prices can increase accordingly. But oil is subject to many other factors. Opec (the Organisation of the Petroleum Exporting Countries) can decide supply by setting quotas on barrels produced, while weather conditions can also affect production. The various costs of doing business in different parts of the world can also impact the supply line. What's the situation with Iran and Strait of Hormuz? Israel sent rockets into Iran on June 13, before President Trump demanded 'not a ceasefire, a real end' to the conflict. Following that, the US fired their own missiles into Iran across the weekend, hitting nuclear facilities and prompting the Asian nation to threaten retaliation. While the attacks centre around Iran's nuclear production, oil prices are impacted because that nation controls the Strait of Hormuz, a key shipping route for around 20m barrels a day, as well as producing more than 1.5m barrels of oil a day themselves. Should Iran opt to close the Strait due to escalated warfare, the restriction of oil supply would therefore be expected to see prices rise further - but so far markets aren't necessarily predicting that. 'Oil and gas prices are staying very calm, all things considered, and the gains in the immediate aftermath of the American bombings in Iran are perhaps more muted that you might have expected,' said Russ Mould, investment director at AJ Bell. Mr Mould suggested factors such as political interventions or Iran's lack of response so far may be a reason for that. Goldman Sachs has warned the price of Brent could rise to $100 and even peak at $110 if the Strait was closed and flows were cut by half for a month, then remained lower than usual for the rest of the year. Perhaps significantly, the investment bank analysts rate the chances of a closure of the Strait at 52 per cent at present. What rising oil prices mean for consumers The immediate link is of course regarding the price of fuel for vehicles, but that's not the only factor at play. 'Where oil and gas go, petrol and energy prices may follow, but regulators and consumers are watching and it may take a period of sustained strength or weakness for the forecourts to show big changes,' explained Mr Mould. 'There's generally about a 4 week gap between movements in oil prices and petrol prices – the chart below illustrates this quite well,' Thomas Pugh, chief economist from RSM UK told The Independent. Over the past month, Brent oil has risen from the mid-60s to its current price point - a rise of more than 18 per cent. How oil prices affect inflation As noted earlier, the spike seen in 2022 contributed enormously to rising energy bills. It's not just that higher oil (and gas) means higher bills for those commodities when businesses or households eventually use them, but also that it in turn means higher transport costs and production costs. All this is a contribution to rising inflation. Mr Mould noted that 'Israel's first missile strike on Iran 10 days ago will already have had some inflationary impact,' which in UK terms will be seen as another blow to efforts to get the economy growing. 'If oil and natural gas prices stay where they are currently, that will add about 0.1 percentage point to inflation in Q3,' predicted Mr Pugh. 'In terms of overall inflation impact, the rule of thumb is that a $10 per barrel rise in oil prices nudges up inflation by about 0.1ppt in the short term and closer to 0.2ppt in the long term, once the impact has filtered through the supply chain.' With UK inflation at 3.4 per cent last month, the danger now is that these external factors mean domestic inflation faces another threat, which in turn might force interest rates to remain higher for even longer than expected - in turn again slowing economic growth efforts.
Reuters
an hour ago
- Reuters
Sterling at five-week low against dollar as markets mull Middle East risk
LONDON, June 23 (Reuters) - The pound fell against the dollar on Monday with the greenback benefiting from safe-haven demand as investors assessed the risk of an Iranian response to U.S. attacks on its nuclear sites. By 1054 GMT the pound was down 0.5% versus the dollar at $1.33795 , its lowest level since May 20. British Prime Minister Keir Starmer spoke to U.S. President Donald Trump on Sunday, his office said. Starmer also urged Iran to return to the negotiating table. Market focus is firmly on the price of oil, which earlier spiked as much as 5.7% and was last up 0.5%. "Ultimately the pound is currencies have a negative sensitivity to oil prices," said Francesco Pesole, FX strategist at ING. Elsewhere, UK flash PMIs hit screens showing business activity expanded modestly in June, but the data barely moved the needle on the pound. The S&P Global UK Composite Purchasing Managers' Index rose to 50.7 from 50.3 in May - edging further above the 50.0 growth threshold. "Overall, the PMIs suggest that the biggest hit to the economy was in April and things are now starting to recover. That said, the subdued level of the PMIs is still pointing to near stagnation," Thomas Pugh, chief economist at RSM UK, wrote in a note. The Bank of England held interest rates at 4.25% last Thursday as expected but flagged a weaker labour market and the risk of higher energy prices as conflict in the Middle East escalated. Despite the hold, market watchers took a doveish hint from the 6-3 vote split in favour of keeping rates on hold, with three MPC members in favour of a cut, a factor that is still playing a role according to ING's Pesole. "Markets are still tending towards the doveish side for the pound curve," he said. As of Monday, 58% of traders were betting on a 25-bps rate cut at the BoE's next session in August, with 42% betting on no change.
