Oil prices jump on US-Iran tensions, dovish Fed boosts stocks
By Roland Jackson | Friday June 21, 2019 06:18
AFP- World oil prices spiked Thursday on rising US-Iran tensions, while the S&P 500 surged to a fresh record as global stock markets smiled on the Federal Reserve’s dovish tilt.
Oil prices rallied on the latest escalation between Washington and Tehran after Iran shot down a US spy drone near the Strait of Hormuz, a major choke point for world crude shipments.
Iran’s Islamic Revolutionary Guard Corps said it brought down the surveillance drone after it entered the country’s airspace near the strategic waterway. The Pentagon said the incident occurred in international airspace.
US benchmark West Texas Intermediate jumped 5.4 percent to $56.65 a barrel on the news, while international benchmark Brent oil climbed 4.3 percent to $64.45 a barrel.
"This will only stoke tensions in the region and produce short-term support for oil prices," said analyst Neil Wilson at trading site Markets.com.
Robbie Fraser, senior commodity analyst at Schneider Electric, said the latest US-Iran fight was a "key bullish driver" for oil prices but did not appreciably affect market conditions.
"From a supply and demand perspective, these escalations have limited impact at present, with US sanctions already dropping Iranian crude exports essentially to zero following the expiration of import waivers on May 2nd," he said in a note.
"However, rising tensions will raise concerns of continued attacks on crude and product traffic through the Hormuz Strait, which serves as a choke-point for roughly 30% of global seaborne crude trade."
The US has previously accused Iran of being behind a series of operations against oil tankers in highly sensitive waters, including two tanker attacks in the Gulf of Oman last week.
Tehran has denied involvement, and floated the possibility Washington could be the author of the attacks, using the operation to justify force against Iran.
– Fed spurs markets higher –
Global equities were meanwhile spurred higher after Fed boss Jerome Powell said bank officials felt the case for a rate reduction had "strengthened," citing the trade standoff with China and weak inflation. The Fed vowed "act as appropriate" to support growth.
The central bank also dropped the word "patient" in describing its stance on interest rates, fueling speculation of a reduction as soon as July.
Stocks rose across international markets, with some of the biggest gains coming in the US. The broad-based S&P 500 ended the day at 2,954.18, up 1.0 percent from Wednesday’s close and about eight points over the record set in April.
The Bank of England, meanwhile left key interest rates unchanged, but warned against the rising danger of a no-deal Brexit, which analysts took as a sign that it, too, seems ready to take a more accommodating stance.
"The fact that Bank of England policymakers are flagging that the perceived risk of a ‘no deal’ Brexit is rising suggests that interest rates are unlikely to rise this year," said James Smith, an economist at ING.
"The latest statement is slightly more dovish than might have been expected."
– Key figures around 2130 GMT –
Brent North Sea oil: UP 4.3% at $64.45 per barrel
West Texas Intermediate: UP 5.4% $56.65 per barrel
New York – Dow: UP 0.9 percent at 26,753.17 (close)
New York – S&P 500: UP 1.0 percent at 2,954.18 (close)
New York – Nasdaq: UP 0.8 percent at 8,051.34 (close)
London – FTSE 100: UP 0.3 percent at 7,424.44 (close)
Frankfurt – DAX 30: UP 0.4 percent at 12,355.39 (close)
Paris – CAC 40: UP 0.3 percent at 5,535.57 (close)
EURO STOXX 50: UP 0.4 percent at 3,468.08 (close)
Tokyo – Nikkei 225: UP 0.6 percent at 21,462.86 (close)
Hong Kong – Hang Seng: UP 1.3 percent at 28,550.43 (close)
Shanghai – Composite: UP 2.4 percent at 2,987.12 (close)
Euro/dollar: UP at $1.1289 from $1.1226 at 2100 GMT
Pound/dollar: UP at $1.2702 from $1.2639
Dollar/yen: DOWN at 107.27 yen from 108.10 yen