Oil and gas prices have seen dramatic lifts as financial markets give their first reaction to the war in the Middle East.
Global stock markets were down across the board but some sectors, such as energy and defence, helped limit losses.
Brent crude oil rose by as much as 13% to $82 per barrel at the start of Asian trading. It later settled around the $79 mark.
That was despite confirmation from two major oil and gas-producing nations that output had been hit due to aerial attacks by Iran on their state-owned infrastructure.
Markets latest: Key developments as war grips Middle East
The world’s largest oil refinery in Saudi Arabia was shut down after it sustained damage.
Contracts for day-ahead natural gas delivery to the UK were up more than 30% early on Monday afternoon while those for April delivery spiked by more than 50%.
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The rises were attributed to news that Qatar’s state-owned energy firm had suspended production of all liquified natural gas (LNG).
The country accounts for about 20% of global LNG supply, which is delivered by ship.
It means we face the prospect of bigger bills ahead, if the higher wholesale prices were to be sustained for an extended period of weeks.
It’s worth remembering however that no hikes to household bills could come until the beginning of July, for those on the price cap. That is because the cap level for April to June has already been set.
It would take many weeks of elevated prices to hurt the outlook for bills.
When it comes to oil, the RAC said average unleaded petrol costs, already tipped to rise by 1p a litre this week due to earlier market shifts, could go up by a further 2p at current wholesale oil price levels but added that it was far too early to call it.
Again, it would take many weeks of elevated prices to crystalise that prospect.
Stock market values have suffered globally, with the FTSE 100 in London plunging by 1.2% to close at 10,780.
Defence-facing stocks saw the biggest gains, with BAE Systems rising 6%. Energy firms also did well on the back of those higher wholesale prices though the chance of prolonged disruption to supplies limited increases later in the session.
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Financial and travel-related shares suffered the most. The biggest faller was IAG, the parent firm of British Airways, down 5.5%.
It was a similar story on the continent where major indices saw larger falls that those witnessed in London. The DAX in Germany and CAC 40 in Paris were down by more than 2% as their trading sessions ended.
In the US, the broad S&P 500 was just 0.2% lower.
Stock markets, analysts said, were reflecting a flight-from risk, though precious metal miners benefited from a 2% rise in the price of ‘safe haven’ gold earlier in the day.
The dollar, Japanese yen and Swiss franc also saw support.
John Wyn Evans, head of market analysis at the investment manager Rathbones, said of the outlook: “Everything hinges on the Strait of Hormuz.”
This is the shipping lane off the Iranian coast which usually accounts for the passage of hundreds of ships per day – now largely empty of traffic as vessels are kept at anchor for their own safety amid the withdrawal of insurance policies.
“The longer it is closed, the worse the effects”, Mr Evans said of the strait. “For now, inventories and limited rerouting options provide some buffer, but the situation remains finely balanced.”
