Oil prices stabilised today after surging the previous day on fears of a US intervention in the Israel-Iran conflict sparked by Donald Trump calling for Tehran’s “unconditional surrender”.
Iran and Israel exchanged missiles for a sixth day, with the US President’s latest comments appearing to dent hopes that the crisis in the Middle East could be calmed, reports AFP.
Leaving the G7 summit in Canada a day early on Monday, Trump said he was aiming for a “real end” to the conflict, not just a ceasefire.
He later shared a series of social media posts that stoked speculation he could be planning to join Israel in its strikes on Iranian military and nuclear sites.
Days after a senior US official said Trump had told Israel to back down from plans to assassinate top leader, Ayatollah Ali Khamenei, the US President looked to reverse course.
“We know exactly where the so-called ‘Supreme Leader’ is hiding. He is an easy target, but is safe there — We are not going to take him out (kill!), at least not for now,” he wrote on his Truth Social platform.
Warning Iran against targeting US interests, he also posted: “But we don’t want missiles shot at civilians, or American soldiers. Our patience is wearing thin.”
And in a later post, wrote: “UNCONDITIONAL SURRENDER!”
The comments sent oil prices spiking more than four per cent on Tuesday on fears an escalation of the conflict could hammer supplies from the crude-rich region.
But while both main contracts dipped today, investors remain on edge over any negative developments.
Of particular concern is the possibility of Iran shutting off the Strait of Hormuz, through which around an estimated fifth of global oil supply traverses, according to the Commerzbank note.
“Iran is reportedly ready to target US regional bases should Trump greenlight strikes on Iranian nuclear facilities,” said Stephen Innes at SPI Asset Management.
“Washington’s refuelling jets are already en route, and if Fordow gets hit, expect the Strait of Hormuz to become a maritime minefield, Houthi drones to swarm Red Sea shipping lanes, and every militia from Basra to Damascus to light up American forward outposts.”
Markets Hong Kong, Shanghai, Seoul, Singapore, Sydney, Wellington, Manila, and Jakarta all sank, though Tokyo, Seoul and Taipei edged up.
The losses followed a weak day on Wall Street, where a below-forecast reading on US retail sales for May — dragged by a slowdown in auto sales — revived fresh worries about the world’s top economy. That came as another report showed factory output fell unexpectedly.
Still, they did provide a little hope that the Federal Reserve will eventually cut interest rates, with traders betting on two by the end of the year, according to Bloomberg News.
Investors will be keeping track of the bank’s latest meeting as it concludes later in the day, with most observers predicting it will stand pat.
However, it is also due to release its rate and economic growth outlook for the rest of the year, which are expected to take into account the impact of Trump’s tariff war.
“The Fed would no doubt be cutting again by now if not for the uncertainty regarding tariffs and a recent escalation of tensions in the Middle East,” said KPMG senior economist Benjamin Shoesmith.
Key Figures At Around 0230 GMT
West Texas Intermediate: FLAT at $74.83 per barrel
Brent North Sea Crude: DOWN 0.1 per cent at $76.37 per barrel
Tokyo – Nikkei 225: UP 0.7 per cent at 38,791.80 (break)
Hong Kong – Hang Seng Index: DOWN 1.3 per cent at 23,680.69
Shanghai – Composite: DOWN 0.4 per cent at 3,373.49
Euro/dollar: UP at $1.1498 from $1.1488 on Tuesday
Pound/dollar: UP at $1.3434 from $1.3425
Dollar/yen: DOWN at 145.15 yen from 145.27 yen
Euro/pound: UP at 85.58 pence from 85.54 pence
New York – Dow: DOWN 0.7 per cent at 42,215.80 (close)
London – FTSE 100: DOWN 0.5 per cent at 8,834.03 (close)
