Markets in the Middle East and Asia Pacific (Apac) are on watch as the price of a barrel of crude oil and West Texas Intermediate (WTI) oil has surged above $100 which is set to put pressure on inflation and slowdown the global economy. WTI has jumped 18% to above $108 a barrel, while Brent has added 16% to $107. US oil prices began the year below $60 a barrel.
There are some concerns a barrel of oil could rise to as much as $150.
The war in Iran and the wider Middle East is continuing with no quick end in sight. US president Donald Trump has described the uptick in oil prices as a “small price to pay” for defeating Iran.
The war is causing significant market disruption as investors try to navigate the serious situation with stock markets tumbling around the world. The Strait of Hormuz, which is usually used daily by ships carrying oil and gas, has effectively been closed by Iran with insurance extremely hard to obtain; some 20 million barrels a day usually pass through the strait.
Nine ships have been attacked since the war broke out on February 28 sparked by attacks from Israel and the US. In addition, multiple countries in the Middle East, including Qatar, Kuwait, Saudi Arabia, the United Arab Emirates (UAE) and Bahrain have been hit by missiles and drones.
In addition to the impact on oil, gas, tourism, businesses in the region and air travel, the impact on the supply of aluminium is another major issue.
A note from financial services platform Marex Group said: “About 6.2 million tons of Gulf Cooperation Council aluminium was produced last year, making the region the second largest supplier outside of China. With aluminium also unable to move, Aluminium Bahrain and Qatar’s Qatalum both declared force majeure this past week.”
The note added: “Other producers are looking to draw down stocks from outside the region in an attempt to fulfill their obligations, but will likely invoke force majeure declarations of their own if the Gulf remain bottled up. The Europeans are particularly concerned, as the Gulf aluminium stoppage comes just as long-term supplier Mozal is going offline this month. In addition, Century’s Grundartangi smelter in Iceland will come back only partially in late October. Russian aluminium supply has been missing for some years now. Not surprisingly, with all this going on physical aluminium premiums on both sides of the Atlantic are soaring.”
This is a developing story.
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