Market News

BY  Chris Price

Oil prices plunged to the lowest level in a week on Monday night as Iran launched a missile strike on a US military base in Qatar.

Brent crude fell by as much as 7.6pc to $71.15 a barrel in response to the retaliatory attacks, which were less severe than traders had expected.

By avoiding energy infrastructure in the region, the strikes eased concerns that Tehran would hit back against America by disrupting global oil supplies.

This came after traders had feared Iran could close the Strait of Hormuz, the vital “chokepoint” that serves as a shipping gateway to the Gulf.

It reflected a sharp turnaround in the market, as oil prices had previously surged to a five-month high earlier in the day.

Following Iran’s attack on the Al Udeid air base on Monday, which did not result in any casualties, Onyx Capital analyst Harry Tchilinguirian said: “This appears to me well orchestrated.

“Iran hits an empty US base, plenty of warning ahead with airspace closure and guidance for shelter. Iran gets its face-saving response and stays clear of the Straits of Hormuz.”

It came after Donald Trump demanded an immediate increase in US oil production to keep prices down.

In social media posts, the US president warned markets to “KEEP OIL PRICES DOWN” and then later called on his government’s energy department to “DRILL, BABY, DRILL... And I mean now!”

Any disruption to oil and gas supplies would cause a spike in prices, analysts have warned. Global investment giant Stifel predicted that it could cause household energy bills in Britain to almost triple to £4,500 in a worst-case scenario.

Heightened tensions in the Middle East led to tankers being warned of an “elevated risk” in the Strait of Hormuz on Monday amid reports that ships were having their navigation systems jammed.

The Joint Maritime Information Center (JMIC) warned that ships entering and departing the Persian Gulf were being hit by “persistently higher levels of electronic interference” that had scrambled satellite navigation and anti-collision systems.

One fifth of global oil supplies and about one third of liquefied natural gas (LNG) cargoes pass through the Strait, with analysts warning that a disruption to shipping risks pushing up prices.

On Monday, maritime tracking data showed ships behaving cautiously, with some performing about-turns, sailing in zigzags or approaching the strait more slowly than usual.

More than 20pc of the vessels passing through the strait on Sunday experienced GPS jamming, according to data provider Windward.

In the JMIC notice on Monday, ships were told: “JMIC recommends the shipping industry remain vigilant to the changing security environment and have threat and risk mitigation plans at-the-ready.”

It said that Iran could soon close the strait, after its parliament approved a motion to close the tanker route in response to the US air strikes.

The decision is non-binding and a final decision rests with Iran’s Supreme National Security Council. However, an EU official claimed Iran did not have the ability to block the Strait of Hor muz “long term”, although it could hamper shipping.

Closing the strait would be “a form of suicide”, the official said.

They added: “The effect on Israel would be close to zero, the effect on themselves immense, as well as on the United States, Europe and China.”

Iran’s own energy exports, in spite of sanctions, remain an important source of income for the world’s ninth-biggest oil-producing country.

It came as oil firms, including BP and TotalEnergies, evacuated some foreign staff from southern Iraq due to the “security situation” in the region.