Oil prices soar after Israel launches strikes on Iran's capital
The price of Brent crude jumped nearly 10% higher at one stage before easing back a little to stand 7% higher at 74 US dollars a barrel.
London's FTSE 100 Index dropped 0.6%, down 56 points to 8828.6, in early morning trading on Friday after heavy overnight losses on Asian stock markets as the worries spooked investors, with the UK's top tier falling back from a record high set in the previous session.
The strikes by Israel on Iran's capital Tehran early on Friday are said to be the most significant attack the country has faced since its 1980s war with Iraq and have led to concerns over an all-out conflict between the two Middle Eastern countries.
In Washington, the Trump administration said it had not been involved in the attack and warned Iran not to retaliate against US interests or personnel.
It threatens disruption to the supply of crude from the Middle East while some traders flagged concerns it could also impact the flow of liquified natural gas (LNG) if tensions escalate.
Rising oil prices could threaten to push up inflation in the UK, possibly impacting the outlook for further interest rate cuts.
The Bank of England has been cutting rates but, as inflation strays further from the 2% target, it has less leeway to bring down borrowing costs.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: 'It's not just the outlook for Iranian exports that's a concern but also the potential for disruption to shipping in the Persian Gulf's Strait of Hormuz, a key route for about 20% of global oil flows and an even higher proportion of liquified natural gas haulage.'
He added: 'The escalation of military action adds another factor to consider for central bankers in an already complex world as they weigh up the inflationary impact of ever-changing tariff rates and a weakening outlook for jobs and growth.'
On the London market, oil giants BP and Shell were among the biggest risers on the steep gains in the cost of crude, with shares up 2% for both firms.
Aerospace giant BAE Systems was also moving higher as the threat of a full-scale war in the Middle East put defence stocks back in the spotlight, with the stock up 3%.
But London-listed airlines were down sharply, hit by a double whammy as rising oil prices spell higher fuel costs for the sector and following the devastating air crash in India.
British Airways owner International Consolidated Airlines fell more than 4% and easyJet was just under 4% lower in morning trading.
Gold prices also leaped towards another fresh record as investors raced for safe haven assets, which could see it breach the 3,431 US dollars-an-ounce high set earlier this month.
Kathleen Brooks, research director at XTB, said: 'If the oil price continues to climb towards 100 US dollars in the coming days, then we could see the interest rate futures market price out rate cuts from the US and Europe, which may add to downside pressure on stocks.
'However, if there is no nuclear escalation, then we think we could see oil prices settle back around 70 US dollars per barrel.'
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The Independent
3 hours ago
- The Independent
Zelenskyy warns oil price surge could help Russia's war effort
A sharp rise in global oil prices following Israeli strikes on Iran will benefit Russia and bolster its military capabilities in the war in Ukraine, Ukrainian President Volodymyr Zelenskyy said Friday in comments that were under embargo until Saturday afternoon. Speaking to journalists in Kyiv, Zelenskyy said the surge in oil prices threatens Ukraine's position on the battlefield, especially because Western allies have not enforced effective price caps on Russian oil exports. 'The strikes led to a sharp increase in the price of oil, which is negative for us,' Zelenskyy said. 'The Russians are getting stronger due to greater income from oil exports.' Global oil prices rose as much as 7% after Israel and Iran exchanged attacks over the past 48 hours, raising concerns that further escalation in the region could disrupt oil exports from the Middle East. Zelenskyy to address concerns with the US Zelenskyy said he planned to raise the issue in an upcoming conversation with U.S. President Donald Trump. 'In the near future, I will be in contact with the American side, I think with the president, and we will raise this issue,' he said. Zelenskyy also expressed concern that U.S. military aid could be diverted away from Ukraine toward Israel during renewed tensions in the Middle East. 'We would like aid to Ukraine not to decrease because of this,' he said. 'Last time, this was a factor that slowed down aid to Ukraine.' Ukraine's military needs have been sidelined by the United States in favor of supporting Israel, Zelenskyy said, citing a shipment of 20,000 interceptor missiles, designed to counter Iran-made Shahed drones, that had been intended for Ukraine but were redirected to Israel. 'And for us it was a blow,' he said. 'When you face 300 to 400 drones a day, most are shot down or go off course, but some get through. We were counting on those missiles.' An air defense system, Barak-8, promised to Ukraine by Israeli President Benjamin Netanyahu was sent to the U.S. for repairs but never delivered to Ukraine, Zelenskyy said. The Ukrainian president conceded that momentum for the Coalition of the Willing, a group of 31 countries which have pledged to strengthen support for Ukraine against Russian aggression, has slowed because of U.S. ambivalence over providing a backstop. 'This situation has shown that Europe has not yet decided for itself that it will be with Ukraine completely if America is not there,' he said. Coalition of the Willing offer under consideration The offer of a foreign troop 'reassurance force' pledged by the Coalition of the Willing was still on the table 'but they need a backstop, as they say, from America,' Zelenskyy said. 'This means that suddenly, if something happens, America will be with them and with Ukraine.' The Ukrainian president also said the presence of foreign contingents in Ukraine would act as a security guarantee and allow Kyiv to make territorial compromises, which is the first time he has articulated a link between the reassurance force and concessions Kyiv is willing to make in negotiations with Russia. 'It is simply that their presence gives us the opportunity to compromise, when we can say that today our state does not have the strength to take our territories within the borders of 1991,' he said. But Europe and Ukraine are still waiting on strong signals from Trump. Without crushing U.S. sanctions against Russia, 'I will tell you frankly, it will be very difficult for us,' Zelenskyy said, adding that it would then fall on Europe to step up military aid to Ukraine. Body and prisoner returns follow Istanbul talks In other developments, Russia repatriated more bodies of fallen soldiers in line with an agreement reached during peace talks in Istanbul between Russian and Ukrainian delegations, Russian officials said Saturday, cited by Russian state media. The officials said Ukraine did not return any bodies to Russia on Saturday. Ukraine's Coordination Headquarters for the Treatment of Prisoners of War confirmed in a statement that Russia returned 1,200 bodies. The first round of the staggered exchanges took place Monday. The agreement to exchange prisoners of war and the bodies of fallen soldiers was the only tangible outcome of the talks in Istanbul on June 2. Russia says push continues Continuing a renewed battlefield push along eastern and northeastern parts of the more than 1,000-kilometer (over 600-mile) front line, the Russian Defense Ministry claimed Saturday that its troops captured another village in the Donetsk region, Zelenyi Kut. The Ukrainian military had no immediate comment on the Russian claim. Russia launched 58 drones and decoys at Ukraine overnight into Saturday, according to the Ukrainian air force, which said its air defenses destroyed 23 drones while another 20 were jammed. Russia's defense ministry said it shot down 66 Ukrainian drones overnight. Attacks have continued despite discussions of a potential ceasefire in the war. During the June 2 talks in Istanbul, Russian and Ukrainian negotiators traded memorandums containing sharply divergent conditions that both sides see as nonstarters, making a quick deal unlikely. ___
Telegraph
7 hours ago
- Telegraph
Mark Carney's conversion from eco warrior to oil and gas champion
Once considered the Bank of England's greenest-ever governor, Mark Carney has seemingly undergone a Damascene conversion. During his time at Threadneedle Street, he called on the world to leave 80pc of oil and gas in the ground. But now, as Canada's new prime minister, he wants to pump as much as he can to protect the country's economy from Donald Trump's trade war. Canada is going to become an energy powerhouse, Carney told reporters last week. And he didn't mean just in renewables. 'When I talk about being an energy superpower, I mean in both clean and conventional energies,' he said. 'And yes, that does mean oil and gas. 'It means using our oil and gas here in Canada to displace imports wherever possible, particularly from the United States. 'It makes no sense to be sending that money south of the border or across the ocean, so yes, it also means more oil and gas exports – without question.' These comments are remarkable given they come from a man who repeatedly called for an end to drilling during his tenure as Bank governor between 2013 and 2020. One such call came in a 2015 speech at Lloyds of London, when he described 80pc of the world's known fossil fuel reserves as 'unburnable'. He said: 'The catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no incentive to fix.' Given Carney's influence, his dramatic warnings inevitably shaped UK government decision-making at the time, as he championed the cause of net zero to a total of five different energy secretaries. Claire Perry, who served as Tory energy minister between 2017 and 2018, recalls: 'Mark had a huge impact on global climate issues. 'He created all the momentum around carbon markets and energy transition investment.' Sir Ed Davey, the Liberal Democrat leader who served as energy secretary in the 2012-15 coalition government, echoes this. 'Mark Carney had a real understanding of where the wind was blowing globally on energy, and recognised the risks to the economy of over-reliance on fossil fuels,' he says. After leaving the Bank, Carney also wrote a book called Value(s): An Economist's Guide to Everything That Matters, where he advocated powerfully for the introduction of carbon taxes. 'One of the most important initiatives is carbon pricing,' he wrote. 'The best approach is a revenue-neutral, progressive carbon tax.' The UK has since faithfully implemented that plan with a raft of carbon levies on consumers and industry, which many argue has left Britain burdened by some of the highest energy prices in the world. 'Energy superpower' Jump ahead to 2025, however, and Carney – now a Canadian politician instead of a British bureaucrat – has adopted a wildly different approach. Immediately after succeeding Justin Trudeau as prime minister and winning Canada's election in April, he wasted no time in signing a directive cancelling Canada's existing carbon tax and confirming rebates for many of those who had paid it. He's now gone even further by pledging to build oil and gas pipelines, LNG export terminals, and to relax the emissions restrictions that have angered many of Canada's biggest fossil fuels producers. And his plans don't stop there. 'All this is not enough just to make Canada an energy superpower,' he said. 'It's not enough to build our full potential. 'It's not enough to truly get incomes growing across the country. We can do much more. We are going to be very, very ambitious. Build, big, build, bold.' Carney, who also previously ran the Bank of Canada, reconciles such ambitions with simultaneous pledges on green technologies that could theoretically reduce emissions, such as carbon capture and storage. But these will take years or decades to implement. According to experts, Carney's conversation has been driven by the economy, as oil and gas accounted for up to 7.5pc of the country's GDP in recent years. In 2023, crude oil exports alone were valued at $124bn, representing 16pc of Canada's total exports. That figure rises to 20pc if gas exports are included. What's more, Canada has about 171bn barrels of oil in recoverable reserves – far greater than America's 44bn. It means Canada can rely on oil for decades, whereas US production is expected to peak in the next few years. However, most of that oil and gas comes from one province, Alberta. That region alone holds billions of dollars, although its voters blame Carney's and Trudeau's Liberal party for climate restrictions that curbed economic growth. A recent opinion piece for Canada's Globe and Mail by Preston Manning, a retired politician who helped found Canada's conservative movement, warned that his 5m fellow Albertans had had enough of rule from Ottawa and were considering secession. Some go further. Alberta, they point out, shares a border with the US and perhaps has more in common with the likes of Texas than Toronto. These growing tensions have created a political opportunity for Alberta's conservative leaders. Independence referendum Less than 24 hours after Carney's election, Danielle Smith, Alberta's premier, introduced a bill to the province's legislature, making it much easier for a citizens' movement to trigger an independence referendum. The new rules slash the number of citizens' signatures required to trigger a referendum, from 600,000 to 177,000 and give petitioners 120 days to collect them rather than the previous 90. She has done so to pile pressure on Carney, handing him a list of nine energy-related federal laws she wants overhauled to unleash more drilling in Alberta. 'We cannot keep the over $9 trillion worth of oil wealth we have in the ground,' she said. 'Mark Carney has acknowledged that the federal government must address key policy barriers. 'That must include abandoning the unconstitutional oil and gas production cap, repealing the tanker ban, and scrapping Canada's net-zero power regulations. 'I believe in a strong and sovereign Alberta within a united Canada, but we cannot persist with the status quo. I won't allow that status quo to continue.' Smith is also exploiting the tensions generated by Donald Trump, the US president, whose talk of making Canada the 51st state resonates with some Albertans. She sees her demands as a test of the scale of Carney's commitment to oil and gas: 'Given his past actions, I've asked myself what version of Mark Carney are we going to get. 'Will we get the pragmatic Bank of Canada governor Mark Carney? Or will we get the environmental extremist keep-it-in-the-ground Mark Carney? 'I don't know the answer yet. He's saying some of the right things, but we need to see meaningful action.' Such tensions have been around for a long time. What Canada's politicians say and do are often very different things, says Brendan Long, a leading energy analyst and Canadian, whose new book Energy Shocks, compares the politics of energy in the UK, US and Canada. He points out that Canada has a long history of electing prime ministers with stridently green manifestos who then preside over huge increases in oil and gas production. 'While previous premier Justin Trudeau had explicitly anti-fossil fuel agendas, domestic Canadian oil and gas production grew dramatically under his leadership,' he said. 'Today, Canada is ranked fourth in terms of global oil production at 5.8m barrels of oil per day and growing.' By contrast, Long points out that the UK is the only large global oil producer to have deliberately cut its production in recent years, signalling the long-standing net-zero legacy left by Carney. 'It means that while Canada's oil and gas industry is ramping up production under Carney, the UK remains aligned with the anti-oil and gas ideology he promoted when he was the governor of the Bank of England,' he says.
Reuters
8 hours ago
- Reuters
US warship arrives in Australia ahead of war games, summit
SYDNEY, June 14 (Reuters) - A key U.S. warship arrived in Australia on Saturday ahead of joint war games and the first summit between Prime Minister Anthony Albanese and President Donald Trump, which is expected to be dominated by military issues. The America, the U.S. Navy's lead amphibious assault ship in the Indo-Pacific, entered Sydney Harbour as the first of three ships in a strike group carrying 2,500 sailors and marines, submarine-hunting helicopters and F-35B fighter jets. More than 30,000 personnel from 19 militaries have begun to arrive in Australia for Talisman Sabre, the largest Australian-U.S. war-fighting exercise. It will start next month and span 6,500 km (4,000 miles), from Australia's Indian Ocean territory of Christmas Island to the Coral Sea on Australia's east coast. The commander of the America, Rear Admiral Tom Shultz, said exercising in Australia was critical for the U.S. Navy's readiness, while the Australian fleet commander, Rear Admiral Chris Smith, said the "trust and robust nature" of the bilateral relationship allowed the two allies to deal with change. "The diversity of how we view the world is actually a real great strength in our alliance," Smith told reporters, adding that Australia also had strong relationships with nations across the region. Albanese and Trump are expected to meet on the sidelines of a summit in Canada of the Group of Seven economic powers, which starts on Sunday. Washington's request for Canberra to raise defence spending to 3.5% of gross domestic product from 2% is expected to dominate the discussion. The Pentagon said this week it was reviewing its AUKUS nuclear submarine partnership with Australia and Britain. Australian Defence Minister Richard Marles said on Saturday this was "not a surprise", adding the two countries continued to work closely. But Michael Green, a former national security adviser to President George W. Bush, said it was unusual for the review into AUKUS to be conducted solely by the Pentagon and that Trump might link it to the spending request or to tariffs. "It is unusual to make the review unilateral and public right before a summit, even if the Australian side knew. That is not good alliance management - it jams the Australian side," said Green, president of the United States Studies Centre in Sydney. Support for AUKUS in the Congress and U.S. Navy is considerable, however, and the review is unlikely to result in the submarine program being cancelled, he said. India will participate for the first time in Talisman Sabre, along with a large contingent from Europe, said the exercise's director, Brigadier Damian Hill. Australia, Singapore, the U.S. and Japan will hold large-scale live firings of rocket and missile systems, he said. "It is the first time we are firing HIMARs in Australia, and our air defence capability will work alongside the United States Patriot systems for the first time, and that is really important," Hill added.
