Oil prices surge after US and Israeli attacks on Iran

(Patria) - Oil prices have sharply increased in the early hours of trading after the United States and Israel launched attacks on Iran over the weekend.

US crude oil prices rose by approximately eight dollars per barrel, or about 12 percent, reaching a price of around 75 dollars per barrel on Sunday evening at the opening of futures trading.

Brent crude, the international benchmark, jumped by more than 12 percent to around 82 dollars per barrel. On Friday, Brent closed trading at just over 73 dollars.

At the same time, stock futures recorded a sharp decline. Futures for the S&P 500, Nasdaq, and Dow Jones indices were down by more than one percent. On the other hand, futures for energy companies like Exxon and Chevron rose by about two percent.

Price increases even before the conflict

The rise in oil prices was noticeable even before the outbreak of the conflict. Ahead of the Asian trading session on Monday, Brent had already strengthened by about eight percent in the past month due to fears of potential supply disruptions.

Iran, partly due to Western sanctions, is not among the world's largest oil producers, but it plays a crucial role in the security of supply through the Strait of Hormuz. This narrow waterway along the Iranian coast accounts for about a fifth of the world's oil supply, so any threat from missiles or drones poses a serious risk to the global market.

According to analysts' estimates, the price increase could have been even higher if the group of oil producers, including Saudi Arabia, had not announced an increase in production aimed at maintaining stable supply and mitigating rising costs.

Impact on interest rates and inflation

A prolonged period of high wholesale oil prices would mean more expensive fuel, as well as the spillover of higher energy costs throughout supply chains. During the day, it will be clearer whether the rise in oil prices will affect financial market expectations regarding a possible interest rate cut by the Bank of England later this month.

If monetary policymakers do not have a clear assessment of the duration of the conflict and disruptions in the Middle East, the risk of a new energy inflation wave could outweigh interest rate cuts, at a time when the monetary policy committee itself is divided on this issue.

Nevertheless, analysts currently do not expect a repeat of the energy shock that followed Russia's invasion of Ukraine, but they warn that a new conflict could further accelerate price increases at a time when their gradual stabilization was expected.