Crude oil prices climbed sharply in trading, with Brent crude reaching $105.3 per barrel on Thursday following concerns about regional instability and supply disruptions. The price movement sparked broad-based selling across international financial markets, with government bond yields rising significantly and equity indexes declining.
The geopolitical component of the price movement stemmed from reports that US officials were considering military strikes against Iran before elections next month. Tensions have escalated over the preceding months, with attacks on shipping in the Strait of Hormuz increasing to their highest levels during the conflict. A tanker was struck by projectiles off Qatar on Wednesday, contributing to concerns about supply reliability from the region.
On the production side, a tropical storm in the Atlantic strengthened to hurricane status, prompting major energy companies to reduce operations in the Gulf of Mexico. Shell and Chevron announced production shutdowns as the weather system approached the coast. Shipping companies also responded to energy price increases, with one major carrier raising emergency fuel surcharges on cargo operations.
The price movement rippled through fixed-income markets globally. UK government bond yields climbed to levels unseen since 2007 for shorter-duration bonds and 1998 for longer-term debt, raising borrowing costs at a time when the government prepares for a major fiscal announcement. Yields in France, Germany, and the United States also increased as investors adjusted positions amid inflation concerns. Equity markets worldwide declined, with Asian and European indexes all posting losses during the session.
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