The price of Brent crude oil is on track for its biggest monthly gain recorded in March after the Iran conflict sent markets into turmoil.
Brent crude, the international benchmark, has risen 51% since the start of March, LSEG data show, hitting a monthly record of 46% in September 1990 after Saddam Hussein invaded Kuwait, leading to the first Gulf War.
Brent closed at $112.57 a barrel on Friday, from $72.48 a barrel on February 27, a day before the US-Israel war against Iran. Brent traded as much as $119.50 a barrel in March, its highest level since June 2022, after Iran closed the Strait of Hormuz, through which a fifth of the world’s oil and gas would pass.
US crude prices also rose in March; West Texas Intermediate gained 48%, for its strongest month since May 2020, when the Covid-19 pandemic devastated the global economy.
Oil prices rose throughout the month despite the release of a combined 400m barrels of oil from the emergency zones announced on 11 March. BloombergNEF analysts estimate that 9 million barrels of oil per day have been wiped out of the world’s oil supply by the Middle East war.
Donald Trump seemed to lose his ability to talk about the price of oil as the war continued. Earlier in the month, the president’s claims of progress in negotiations lowered prices, but in late March his announcement of a 10-day extension for Iran to open the Strait of Hormuz was followed by a rise in oil prices and a fall in stock markets.
Oil was the best-performing asset during a volatile month for markets, where shares, government bond prices and precious metals all fell.
Gold failed to live up to its reputation as a safe haven against inflation. The price of the spot gold is down about 15% since the beginning of March, heading for its worst month since 2008, and the fifth biggest monthly decline in the past 50 years.
Some investors may have been forced to sell gold to cover losses, or cover costs, elsewhere in the market.
Gold was also under pressure from the sale of about $3bn of bullion by the Central Bank of Turkey last week. It reduced its stockpiles by about 50 tons to 772 tons, to support efforts to stabilize Turkey’s enemies.
Losses on Wall Street in March dragged the Dow Jones industrial average to a correction late last week, more than 10% below its record high. Stocks fell despite Trump’s latest escalation of planned strikes against Iran’s energy facilities, as investors anticipated a prolonged disruption of Gulf oil supplies.
“Markets seem to be putting less weight on the White House jawboning and are more focused on existing supply risks,” said Fawad Razaqzada, an analyst at City Index.
The British stock market also had a bad month, with the FTSE 100 index down more than 8% – heading for its worst month since March 2020, as Covid-19 rocked financial markets. Almost all of its gains in January and February have been wiped out, with the FTSE 100 ending last week below 10,000 points.
UK government bonds also weakened through March, as traders shrugged off forecasts that the Bank of England would cut interest rates this year. As bond prices fell, yields (or interest rates) on 10-year UK bonds rose by 17% to around 5%, the biggest monthly increase in borrowing costs since September 2022 when Liz Truss’s mini-budget triggered bond sales.
Other European government bonds were also hit; Italy’s two-year debt was headed for its worst month since May 2018.
Modupe Adegbembo, Economist Jefferies, said that European governments were working from a much weaker fiscal position than in 2022, which is the last energy price shock, which means they have less room for more fiscal intervention.
“As a result, there may be many changes that may fall on demand,” which is bad for the growth outlook, Adegbembo added.
#Oil #track #monthly #increase #Iran #war #wreaks #havoc #markets