The Iran conflict has driven the oil price past $90 a barrel to its highest weekly gains since the Covid-19 pandemic six years ago. 50 just before war broke out. The price of the international benchmark has surged by more than 25% since the US-Israel attack on Iran last weekend, its biggest weekly jump since the week to 3 April 2020.
Kuwait has begun cutting production of oil at some fields after running out of space to store it. Holding facilities in Saudi Arabia and the United Arab Emirates could reach their limit within 20 days, according to consultants at Kpler. Qatar's energy minister predicted that if the war continued unabated all Gulf energy exporters would shut down production within weeks and oil would rise to $150 a barrel.
Saad al-Kaabi told the Financial Times that even if the war ended immediately it would take 'weeks to months' for the Gulf state to resume its liquified natural gas exports after an Iranian drone strike damaged an important terminal. Qatar accounts for about 20% of global exports of LNG. Prices on the UK gas market surged to three-year highs this week amid fears that Europe may need to pay a premium to compete with buyers in Asia for gas cargoes if deliveries do not resume soon.
Iran's Islamic Revolutionary Guard Corps have threatened to 'set ablaze' any western tanker attempting to pass through the strait, which provides a vital trade route for about a fifth of the world's oil and liquefied natural gas. At least nine vessels have been attacked in the Gulf since the US and Israel first began strikes on Iran on Saturday 28 February, according to Lloyd's List. The market has remained unconvinced by the Trump administration's attempt to calm nerves by offering insurance and a military escort for tankers that opt to sail through the narrow waterway, according to Aaron Hill, chief market analyst at FP Markets.
The gas market highs have fuelled inflation fears in a blow to UK government bond prices, putting the yields on five- and 10-year bonds on course for their biggest one-week jump since then prime minister Liz Truss's 'mini-budget' in September 2022. Hopes of a cut to UK interest rates this month have waned through the week.