Brent crude hovers around $105 amid Iran's increased strikes on Gulf sites, and stock markets show mixed performance

Global Markets React to Ongoing Gulf Conflict

Brent crude hovered around $105 per barrel on Monday as Gulf nations reported additional Iranian strikes, marking the third week of hostilities. Meanwhile, stock markets showed mixed results.

The international benchmark Brent crude rose 1.6% to $104.73 per barrel, after briefly surpassing $106. Since the conflict began, prices have surged over 40%.

U.S. crude also advanced, gaining 1% to reach $99.68 per barrel—nearly 50% higher since the onset of the war.

Asian Stock Indices Show Divergent Trends

• Tokyo's Nikkei 225 dropped 0.4% to 53,609.49.
• South Korea's Kospi increased 0.6% to 5,521.17.
• Hong Kong's Hang Seng climbed 1.1% to 25,755.53.
• Shanghai Composite declined 0.7% to 4,066.40.
• Australia's S&P/ASX 200 slipped 0.4% to 8,583.50.
• Taiwan's Taiex edged up 0.1%.
• India's Sensex fell by 0.1%.

U.S. stock futures moved higher, with S&P 500 contracts up 0.5% and Dow Jones futures rising 0.4%.

Wall Street Faces Continued Pressure

On Friday, U.S. markets extended their losses as oil prices soared above $100 per barrel, intensifying inflation concerns worldwide.

• S&P 500 dropped 0.6% to 6,632.19, now down 3.1% year-to-date.
• Dow Jones Industrial Average fell 0.3% to 46,558.47.
• Nasdaq Composite declined 0.9% to 22,105.36.

All major indexes recorded their third consecutive weekly loss.

Impact of the Strait of Hormuz Closure

Iran has responded to Israeli and U.S. actions by blocking cargo movement through the Strait of Hormuz, a crucial route for global oil shipments. This disruption has forced oil producers to reduce output, as their crude cannot be transported.

According to Rystad Energy, over 12 million barrels of oil equivalent per day have been removed from the market in the week following the strait's closure. Despite this, a few tankers have reportedly managed to pass through, adding to market uncertainty.

Stephen Innes of SPI Asset Management noted, "Currently, the market is shrouded in uncertainty. Typically, the strait accommodates about 25 oil and LNG tankers daily."

Inflation Risks and Emergency Measures

If the conflict continues to disrupt oil production and shipping in the Persian Gulf, it could trigger a significant inflation spike.

Members of the International Energy Agency are releasing a record 400 million barrels of oil from emergency reserves, but this move has done little to calm financial markets.

Rising inflation expectations are making it harder for the Federal Reserve to lower interest rates. The central bank is not anticipated to reduce rates at its upcoming policy meeting.

Consumer Spending and Economic Updates

Recent data released Friday indicates that inflation edged higher in January, even before the Iran conflict drove up oil and gas prices.

The Commerce Department reported that consumer prices increased by 2.8% in January compared to the previous year. Excluding food and energy, core prices rose 3.1%, marking the largest jump in nearly two years.

Despite rising costs, consumer spending and incomes both grew at a steady 0.4% rate in January.

The University of Michigan's latest consumer sentiment survey showed a slight decline, reaching its lowest point this year, largely due to higher gasoline prices since the start of the Iran conflict.

Wall Street also received an update on U.S. economic growth for the fourth quarter. The economy, impacted by last fall’s 43-day government shutdown, expanded at a modest 0.7% annual rate, a downward revision from the previous estimate.

Currency Movements

• The U.S. dollar slipped to 159.47 Japanese yen from 159.55 yen.
• The euro strengthened to $1.1442 from $1.1425.