The Tamesis
The crisis in the Middle East escalated on Monday and over the weekend, with Houthi rebels joining the conflict and Iran launching attacks on aluminum smelters in Bahrain and the United Arab Emirates.
There is also speculation that the United States may deploy troops and may try to seize Iran’s oil production facilities – or bomb-grade uranium – on Khag Island. This suggests there are still weeks of turmoil ahead.
So it was no surprise that oil and aluminum prices rose while Asian markets fell again on Monday. Brent North Sea crude oil rose more than 3% to nearly $117 a barrel, close to the largest monthly gain in history, while U.S. crude also hit $102, although both fell slightly later.
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Asian markets fall again
Major Asian stock markets ended lower, while the U.S. dollar traded mixed. Meanwhile, the Japanese yen gained on talk that the Bank of Japan may intervene in the market to support the yen’s exchange rate.
The appreciation of the yen dealt a heavy blow to Japanese exporters, with the Tokyo stock market closing down nearly 3%. That pushed the company’s March loss to more than 12%.
South Korea’s Kospi fell nearly 3%, taking its monthly loss to nearly 9%.
Hong Kong’s Hang Seng Index fell just over 0.8%, while the Shanghai Composite Index edged up 0.24%.
Other markets that posted sharp losses included Manila, down 1.73%, and Mumbai’s BSE Sensex, down 2.22%.
In Europe, London edged higher in early trading, while Paris and Frankfurt were little changed on the back of gains in shares of heavyweight energy and mining groups.
Shares of oil companies such as TotalEnergies and BP rose about 2%, outperforming the rest of the market.
Aluminum prices rose about 6% on the London Metal Exchange after Iran attacked two major aluminum plants in the Gulf region, raising concerns about supply disruptions.
Analysts said Iran’s attacks on the United Arab Emirates and Bahrain could spur record prices for the metal, which is used in products ranging from aircraft to solar panels and tableware.
War could spread to Red Sea
“While risk aversion drives a stronger dollar, oil remains in focus,” Richard Hunter, head of markets at Interactive Investor, told AFP.
“As attacks in the Gulf continued over the weekend, a new layer of risk emerged as Yemen’s Houthi rebels joined the fight, which could restrict shipping in the Red Sea and add another bottleneck to oil supplies.”
As the conflict enters its second month, the Houthis said on Saturday they had launched “a series of cruise missiles and drones” at strategic Israeli locations, raising the prospect of an expansion.
The attacks have stoked fears of the war spilling into the Red Sea, and Saudi Arabia has rerouted much of its oil exports to avoid the Strait of Hormuz, which has been effectively closed by Tehran.
U.S. President Donald Trump added to market pessimism by telling the Financial Times that he wanted to “seize Iran’s oil” and could seize Khag Island “very easily.”
Khag Island, located off Iran’s west coast, is a key oil terminal for the country and another target of ground operations that the Pentagon is focusing on, although the United States insists it will not stop a full-scale invasion.
Tehran says US plans ‘ground attack’
While Pakistan said on Sunday it was ready to mediate and host “meaningful talks” between Washington and Tehran to end the war, Iranian parliament speaker Mohammad Bagher Ghalibaf said the United States was “secretly planning a ground attack.”
Chris Weston, an analyst at broker Pepperstone, noted: “Rising short-term inflation expectations, interest rate market volatility, growing concerns about supply shortages/inventories and the subsequent impact on the March/April economic data series and corporate earnings are now top of mind.”
“The Houthis’ ability to disrupt shipping in the Bab el-Mandab Strait, which accounts for about 12 percent of global trade, is a new key risk,” he added, referring to the waterway between Yemen and the Horn of Africa.
Meanwhile, the International Atomic Energy Agency said on Sunday that Iran’s heavy water plant in Khondab had been severely damaged by U.S. and Israeli attacks. Heavy water is used in nuclear power and weapons-grade plutonium.
- Jim Pollard, AFP.
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