Middle East economic impact surges as oil prices spike 10%, economists warn

James Okafor | GlobalBeat

The Middle East conflict drove oil prices up 10% in three trading days and threatens to add 0.7 percentage points to global inflation, economists said on Tuesday.

The price surge marked the steepest three-day climb since Russia’s invasion of Ukraine, according to Refinitiv data.

Higher energy costs could push central banks to extend interest-rate increases, Deloitte chief economist Ira Kalish wrote in a note circulated to clients.

International benchmark Brent crude traded at $91.50 per barrel on Tuesday, up from $83.40 on Friday, the London-based exchange reported.

Shipping insurance rates for vessels passing through the Strait of Hormuz rose 15%, the Baltic Exchange told GlobalBeat.

One-fifth of globally traded oil passes through the narrow waterway, the London shipbroker confirmed.

Major economies raised emergency stockpile plans, energy officials told reporters on condition of anonymity.

Germany activated the first of three consumption-curbing stages under its crisis protocol, an economy-ministry spokesman confirmed.

Deutsche Bank revised its 2024 global-growth forecast down 0.5 percentage points to 2.3%, the lender said in a research bulletin.

Goldman Sachs warned clients that crude could reach $100 if Israeli ports remain disrupted for another month.

The bank had previously projected an $87 fourth-quarter average, commodities head Jeff Currie told CNBC.

Asian refineries cut runs 3%, Singapore-based data provider Kpler reported.

European natural-gas futures added 12% despite months of record storage, ICE Endex figures showed.

Stock markets sold off. The MSCI World Index fell 2.1% in its worst session since March, index operator MSCI said.

Defense contractors gained across the board. Lockheed Martin rallied 5.8%, the New York Stock Exchange reported.

Central banks face a dilemma, Morgan Stanley analysts wrote. Inflation is rising, yet economies are fragile, they added.

A prolonged conflict could erase $1 trillion from global output, the Institute of International Finance estimated.

Emerging markets that import oil are most vulnerable. Turkey’s lira slid 2.4% to a record low, the central bank confirmed.

India’s rupee approached 84 per dollar, Reserve Bank of India data showed.

Jet-fuel prices climbed 14% in spot markets, trading sources told GlobalBeat.

U.S. motorists paid $3.91 per gallon on average Tuesday, up 11 cents from Friday, AAA said.

Background

Oil traders remember the 1973 embargo, when prices quadrupled after the Yom Kippur War, International Energy Agency archives show.

The 2019 Abqaiq attack briefly knocked out 5% of global supply, pushing Brent up 20% in a single session, exchange records confirm.

What’s Next

The International Energy Agency holds an emergency-stock release meeting on Thursday in Paris, a spokesperson confirmed.

Final paragraph

The United Nations plans to publish updated trade forecasts next week that factor in the new risk premium across energy markets.