Global oil prices remained above the $100 mark while major stock markets around the world declined, as investors continued to react to the ongoing conflict in the Middle East and the potential disruption to global energy supplies.
The benchmark Brent crude oil briefly slipped below $100 per barrel during the trading session, which initially helped equities recover slightly.
However, markets quickly reversed course as oil prices climbed again. Brent eventually settled at $103.14 per barrel, marking a surge of more than 42 per cent since the outbreak of the conflict.
Meanwhile, West Texas Intermediate, the main US oil benchmark, rose by 3.1 per cent to close at $98.71 per barrel.
The surge in oil prices followed military strikes by the United States and Israel on Iran on 28 February, which pushed the region into a broader conflict. In response, Tehran warned it could restrict shipping through the Strait of Hormuz, a key maritime route through which roughly one-fifth of the world’s crude oil and liquefied natural gas passes.
Market analysts say oil prices have become the primary driver of global market movements in recent weeks.
Fawad Razaqzada, an analyst at Forex.com, said crude oil continues to shape investor sentiment as traders assess the likely duration and economic impact of the conflict.
“The pressure remains with no end in sight to the Middle East conflict,” Razaqzada noted, adding that traders are struggling to determine a fair price for oil amid emergency stockpile releases and temporary easing of sanctions on Russian oil shipments already in transit.
Concerns over the conflict’s impact on energy supply have intensified fears of a broader energy crisis.
Joshua Mahony, chief market analyst at Scope Markets, said rising oil prices are raising fresh concerns about global inflation.
According to Mahony, investors are increasingly worried that higher fuel costs could spread throughout the global economy, pushing up prices for goods and services.
The energy shock is also complicating monetary policy decisions for central banks worldwide. Before the conflict began, many economists expected several major central banks to continue cutting interest rates this year.
However, with energy prices climbing sharply, policymakers may now be forced to pause or even raise borrowing costs to contain inflation.
Seven major central banks are scheduled to hold policy meetings next week, and markets will be closely watching for signals about how they plan to respond to the evolving economic risks.
Meanwhile, new economic data from the United States added to concerns about slowing growth. Updated figures showed that US economic expansion in the fourth quarter was revised downward to 0.7 per cent, compared with an earlier estimate of 1.4 per cent.
At the same time, the Federal Reserve’s preferred inflation gauge indicated that inflation slowed slightly to 2.8 per cent in January - still above the central bank’s target of two per cent and measured before the recent surge in energy prices.
Bret Kenwell, an investment analyst at eToro US, said the Federal Reserve now faces a difficult environment in which inflation remains stubbornly high while economic growth and labour market momentum appear to be weakening.
Global stock markets reflected these concerns. In New York, the Dow Jones Industrial Average fell 0.3 per cent, while the S&P 500 dropped 0.6 per cent and the Nasdaq Composite lost 0.9 per cent.
European markets also ended lower, with the FTSE 100 in London falling 0.4 per cent, CAC 40 in Paris dropping 0.9 per cent and Germany’s DAX declining 0.6 per cent.
Asian markets also closed in negative territory earlier in the day. Nikkei 225 in Tokyo fell 1.2 per cent, while Hong Kong’s Hang Seng Index declined 1.0 per cent. The Shanghai Composite Index slipped 0.8 per cent.
Currency markets also reflected investor caution, with the US dollar strengthening against major currencies due to its safe-haven appeal during times of geopolitical uncertainty.
Analysts say next week’s central bank meetings will be crucial in determining whether policymakers view the surge in oil prices as a temporary shock or the beginning of a longer-lasting inflationary trend.
