Iran Conflict Sparks Global Energy Price Surge
A new wave of fighting in Iran has sent oil and gas prices soaring, raising concerns about inflation as Europe heads into winter with low gas inventories. The renewed hostilities between the US and Iran have pushed Brent crude near $95 a barrel, lifted European natural gas prices to a three-year high, and raised fuel costs globally.
The U.S. military carried out its second round of attacks in three days on Iran, targeting radar systems and mine-laying capabilities along Iran's southern coast. The Islamic Republic retaliated with drone and missile volleys on U.S. bases across the Middle East, claiming attacks in Kuwait, Jordan, Bahrain, Iraq, and the United Arab Emirates.
The disruptions threaten Europe's efforts to rebuild gas inventories ahead of winter, which are currently just 65% full, the lowest seasonal level in data going back to 2009. As well as Ukraine's attacks on Russian fuelmakers, the war itself means fewer refined fuel cargoes are leaving the Persian Gulf.
Thomas Pugh, chief economist at RSM U.K., noted that oil prices 'are increasingly not the thing to focus on; it's petrol and diesel prices that are the thing to look at.' He added that 'oil's pricing as if oil's $140' in some markets. The surge is stoking a run-up in global bond yields, which have ballooned to the highest since the 2008 financial crisis amid heavy government spending in major markets like Japan, the U.K., and the U.S.