Oil prices soar, Asia stocks drop after Israel strikes Iran

SYDNEY – Crude oil prices soared after Israel

carried out air strikes against targets in Iran

, raising fears of fresh confrontations in a region that accounts for a third of global crude production.

After both spiked more than 12 per cent earlier on June 13, global benchmark Brent was up 9.3 per cent at US$75.83, while West Texas Intermediate was up 9.5 per cent to US$74.52.

A sustained gain in energy costs may fan global inflation, complicating the tasks facing central bankers as they navigate the fallout from the US-led trade war.

“We are back in an environment of heightened geopolitical uncertainty, leaving the oil market on tenterhooks and requiring it to start pricing in a larger risk premium for any potential supply disruptions,” said Mr Warren Patterson, head of commodities strategy at ING Groep.

Escalation is the key fear for markets after the Israeli strike, analysts said.

Said Mr Matt Maley, chief market strategist at Miller Tabak: “The assumption that this will be a quick affair is a risky one... If this turns into something lengthy and the Strait of Hormuz gets impacted, oil can go above US$100 very quickly and that puts pressure on global growth.

“I don’t want to overstate it because we simply don’t know if things will get worse or not. The real risks are very high right now.”

Israel launched wide-scale strikes against Iran on June 13, saying it targeted nuclear facilities, ballistic missile factories and military commanders and that this was the start of a prolonged operation to prevent Tehran from building an atomic weapon.

Iranian media and witnesses reported explosions including at the country’s main uranium enrichment facility in Natanz, while Israel declared a state of emergency in anticipation of retaliatory missile and drone strikes.

Oil is on course for the biggest weekly gain since 2022 amid the spike in tensions in the Middle East, erasing year-to-date losses driven by the fallout from global trade tensions and a decision by Opec+ to revive shuttered capacity at a faster-than-expected clip.

Earlier this week, JPMorgan Chase warned that prices could reach US$130 a barrel in a worst-case scenario in the Middle East.

Ahead of the Israeli strikes, the US and Iran had been scheduled to hold a sixth round of nuclear talks in Oman on June 15. The status of the negotiations is now unclear.

Meanwhile, stocks fell, led by a sell-off in US futures, while safe havens like gold, the US dollar, the Swiss franc and the yen climbed.

US S&P 500 e-mini futures tumbled 1.7 per cent, while Nasdaq futures plunged 1.7 per cent.

Singapore’s Straits Times Index was down 0.5 per cent at 11.24am.

Japan’s Nikkei lost 1.3 per cent and South Korea’s Kospi fell 1.2 per cent. Hong Kong’s Hang Seng and China’s Shanghai Composite Index both dropped 0.8 per cent.

Safe haven spot gold rose 1.1 per cent to US$3,422.95 an ounce.

The US dollar rallied alongside the safe-haven Japanese yen and Swiss franc.

Risk-sensitive Asian currencies such as the Aussie dollar and the New Zealand dollar weakened 0.9 per cent each.

An index that measures the US dollar against six other currencies gained 0.4 per cent. 

The Swiss franc gained about 0.5 per cent to 0.8060 per US dollar, while the yen rose 0.4 per cent to 142.89 per dollar.

Mr Rodrigo Catril, a strategist at National Australia Bank, said: “One theme to watch is whether the dollar’s safe haven attributes are being diluted by the US administration’s trade policy (tariffs), fiscal profligacy and its challenge to the rule of law. Evidence to date suggests that is the case”

“Israel’s unilateral move, if confirmed, also highlights how the world order is potentially changing. The US is seemingly stepping away from a leading geopolitical role, opening the door for others to pursue their own agenda.”

“The concern here would be that Israel is just one, and others could follow in the belief that the US won’t be there to stop them.” BLOOMBERG, REUTERS