Oil prices jumped as much as 3.5% and European shares have opened lower, as escalating tensions between the US and Iran spoked investors.
Brent crude has risen through $86 a barrel, and is currently up 3.4% at $86.15 a barrel, after the US carried out a third night of military strikes against Iran and Donald Trump announced a blockade of Iranian shipping and a 20% fee on cargo transiting the strait of Hormuz.
The US president said the passage would stay open “with or without Iran” but that the US would start charging fees on ships transiting through the waterway, in an apparent policy reversal. A 20% fee would be levied “for any and all costs necessary” to provide security and safety for vessels.
US strikes Iran for third consecutive night as Trump plans Hormuz transit fee – Middle East crisis liveRead moreThe FTSE 100 index in London is down 0.5%, or 52 points, at 10,445. The German Dax has dropped 0.55%, the French CAC lost 0.9%, the Italian borsa declined 0.7% and the Spanish Ibex tumbled 1.07%.
BP has topped the FTSE 100 with a 3% gain, while Shell shares are 1.7% ahead, after a trading update from BP.
BP said net debt at the end of the second quarter is expected to fall to between $22bn and $23bn, from $25.3bn in the first quarter. It also expects its second quarter oil trading result to be “slightly higher” compared with the first quarter.
Victoria Scholar, head of investment at the trading platform interactive investor, said:
double quotation markThat’s even after an extremely strong period for oil trading last quarter when the Iran war fuelled energy shock supercharged earnings which more than doubled year-on-year.
It appears that the Middle East uncertainty is here to stay at least for now after the US said it will reimpose a naval blockade on Iran, reversing course after last month’s steps towards a peace deal with Iran. Ongoing higher oil prices are supportive of BP’s share price as well as its earnings in the near-term, but the company’s outlook is highly vulnerable to developments in the Iran conflict beyond its control.
