Category: 3. Business

Conflict in the Middle East has been unleashing turmoil in the world’s financial markets and has pushed wholesale oil prices to levels not seen for years.

This has ignited worries about the possible knock-on effects to economies around the world, and how it will impact the cost of living for households up and down the UK.

Here, the Press Association looks at how the conflict could affect people’s finances in different ways.

– What’s happening to gas and oil prices?

A major impact of escalating conflict in the Middle East is on the world’s oil and gas supplies.

Prices have been climbing higher amid concerns that the fighting is disrupting supply and limiting the ability to transport to countries around the world.

This is because Iran has effectively blocked commercial ships from passing through the Strait of Hormuz, leading traffic through the waterway to reach a near-standstill, according to reports.

The Strait of Hormuz is a crucial shipping route, used by tankers carrying about one fifth of the world’s oil supplies and seaborne gas.

The price of Brent crude – a global benchmark for oil produced from the North Sea – has shot passed 100 dollars a barrel to reach levels not seen since the summer of 2022.

Natural gas prices have also  been soaring after Qatar’s state-backed energy company QatarEnergy last week said it had halted production of liquified natural gas because of attacks on its facilities.

– What does this all mean for my energy bill?

The UK imports oil and liquified natural gas (LNG) from a variety of places, not just the Middle East.

However, if supplies passing through the Strait of Hormuz are disrupted, then demand for alternatives go up and there could be a significant rise in gas and electricity prices, which is what happened after Russia’s invasion of Ukraine in 2022.

This is because wholesale gas prices feed through into electricity prices and how much it costs to heat people’s homes.

Analysts at Cornwall Insight have forecast that household energy bills could rise by 10% from July following sharp increases in wholesale gas prices.

This would mean Ofgem’s price cap for July to September surges to £1,801 a year for a typical dual fuel household – an increase of £160 or 10% on April’s cap.

However, it said the final price cap figure would be based on average wholesale prices over a three-month period, meaning that it would depend on how long gas prices stayed elevated and how long the period of volatility continued.

Meanwhile, National Gas, which owns and operates Britain’s gas network, said it had no concerns about the security of gas supplies at the current time.

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The vast majority of Britain’s gas, around three quarters, comes from the UK continental shelf and Norway, and around 18% comes from LNG, of which the majority is produced in the US.

 – What about petrol and diesel prices?

The cost of crude oil can have a significant effect on wholesale fuel prices, which is sending costs at the petrol pumps sharply higher.

The RAC said the average price of a litre of petrol at UK forecourts was 137.5p on Sunday after rising nearly 5p since February 28 when the conflict in the Middle East started.

Average diesel prices were up almost 9p over the same period to 151p.

Think tank the Energy and Climate Intelligence Unit said its analysis of the historic link between oil and fuel prices shows oil trading at 100 dollars a barrel means petrol prices could hit about 150p per litre, while oil hitting 120 dollars a barrel means petrol prices of about 170p per litre.

RAC head of policy Simon Williams said last weak that oil prices would “have to rise significantly and stay that way for some time to have a dramatic effect”.

Other experts suggested that motorists could see price rises happen gradually for both petrol and diesel.

– Are prices in shops going to be affected too?

Rising oil and shipping costs alongside disruption to supply routes and raw materials could start to filter through to shop prices in the months ahead.

Analysts have said specific categories to watch include fragrance, particularly oud and other luxury scent bases, and foods produced in the Middle East like dates, olive oil, nuts and spices such as saffron.

Beyond that, the Middle East largely imports rather than exports everyday food products, meaning that the world’s food supplies are unlikely to be hit directly.

However, the region is a major producer of fertiliser used for farming, such as ammonia and sulphur, so any disruption could drive up costs for famers around the world.

Experts said fertiliser price spikes could affect products like bread, cereals, pasta, potatoes and animal feed.

Furthermore, UK brands who rely on global supply routes that pass through or near the region could be affected if shipping costs increase or delivery times lengthen, should the conflict spread and persist.

– What could this mean for inflation and interest rates?

Some experts have warned that if oil and gas prices remain elevated, this could push up inflation in the UK.

The British Chambers of Commerce (BCC) said that higher oil and gas prices linked to the war could push up Consumer Prices Index (CPI) inflation in the UK to 2.7% by the end of 2026, compared with a previous 2.1% forecast.

This could discourage the Bank of England from cutting UK interest rates in the near-term, while it monitors the situation in the Middle East.

The National Institute of Economic and Social Research (Niesr) predicted that a prolonged energy price shock means rates could rise above 4%, from the current 3.75%, by the end of the year.

– What’s happening to mortgages?

A string of major mortgage lenders have hiked their rates in recent days, following rises in swap rates as global events unfold. Swap rates are used by lenders to price mortgages.

HSBC UK, NatWest, Nationwide Building Society and Coventry Building Society are among the lenders who have pushed up some mortgage rates amid the changing market conditions.

Financial information website Moneyfacts said it had seen several other lenders adjusting rates on Monday.

Its figures also indicate that some average rates on fixed mortgages have jumped over the weekend.

The average two-year fixed homeowner mortgage rate on the market on Monday morning was 4.87%, up from 4.84% on Friday.

The average five-year fixed homeowner mortgage rate on Monday morning was 4.98%, rising from 4.96% on Friday.

ISLAMABAD: Pakistan’s Information Minister Ataullah Tarar has said that no civilian areas were targeted in the ongoing Afghanistan operation and Pakistani strikes were solely aimed at militant infrastructure and support networks, his office said on Monday.

The statement came after the Afghan Taliban government and the United Nations mission in Kabul accused Pakistan of targeting civilian areas during the ongoing operation, “Ghazab Lil Haq,” or the “Wrath for Truth.”

Clashes between the countries began on Feb. 26, when Afghan forces launched an attack on Pakistani military along their shared border in retaliation for Pakistan’s earlier airstrikes on what Islamabad said were militant camps inside Afghanistan.

In a conversation with foreign media correspondents, Tarar said that Pakistan was taking action inside Afghanistan based on “accurate” intelligence information.

“Pakistan has not targeted any civilian area in Afghanistan,” he was quoted as saying by his ministry. “Pakistan is only targeting the infrastructure of terrorists and their support system.”

The minister denied reports of civilian deaths, saying the UN agency was “completely dependent on the Taliban government” for information. The UN rights chief said Friday that 56 Afghan civilians had been killed, nearly half of them children, since the hostilities began.

Tarar also dismissed as “just propaganda” the claims made by an Afghan defense ministry spokesperson about inflicting battlefield losses on Pakistan. Tarar said on Sunday that 583 Afghan Taliban fighters had so far been killed in Pakistani strikes, a claim difficult to verify independently.

Islamabad has long accused Kabul of sheltering militant groups, including the Pakistani Taliban, or the Tehreek-e-Taliban Pakistan, and facilitating attacks against Pakistan. Afghanistan denies the allegations and says Islamabad’s security challenges are an internal matter.

Afghanistan has called for dialogue to resolve the conflict. Pakistan, however, has rejected talks, saying the operation will continue until its objectives are met.

“There is a nexus between the Afghan Taliban government and several terrorist organizations operating from Afghan soil,” Tarar added.

BANGKOK (AP) — Japan’s benchmark Nikkei 225 index plunged more than 5% and other Asian markets also tumbled Monday after oil prices soared to nearly $120 a barrel, casting a shadow over economies heavily dependent on imported crude and gas from the region.

The futures for the S&P 500, Nasdaq composite index and the Dow Jones Industrial Average were trading more than 1% lower after dropping more than 2% late Sunday.

A Chinese special envoy to the Middle East, Zhai Jun, called for an end to the attacks and said strikes on non-military targets and civilians should be condemned. Meanwhile, South Korean President Lee Jae Myung warned against hoarding, panic buying and collusion between refiners and gas stations.

“Please respond proactively to the growing volatility in the financial and foreign exchange markets, which are the lifeblood of our economy,” Lee said.

Oil prices rocketed higher after both sides in the war struck new targets over the weekend, including civilian ones. Bahrain accused Iran of hitting one of the desalination plants that are crucial for drinking water in Gulf countries. Israel struck oil depots in Tehran, sending up thick smoke and causing environmental alerts.

The Nikkei regained some of its earlier losses to shed 5.2% to 52,728.72. South Korea’s Kospi sank 6% to 5,251.87.

Chinese markets, which tend to be less affected by global trends, saw more moderate losses. Hong Kong’s Hang Seng fell 1.6% to 25,343.77 the Shanghai Composite index was down 0.7% at 4,097.69.

Taiwan’s benchmark dived 4.4% and other regional markets also swooned.

As of 0600 GMT, the price for a barrel of Brent crude was $103.54 a barrel. U.S. benchmark crude rose to $107.35. Both were about 15% above their closing prices Friday.

Crude prices have spiked to their highest levels in at least 14 years as the war, now in its second week, ensnares countries and places that are critical to the production and movement of oil and gas from the Persian Gulf. . They last rose above $100 shortly after Russia invaded Ukraine in 2022.

“The market woke up to the sound every macro trader dreads. The oil alarm bell. And this time it was not a polite chime. It was a fire siren,” Stephen Innes of SPI Asset Management said in a commentary.

Surging oil and gas prices, if they persist, could ripple across the globe, further complicating matters for countries still adjusting to higher tariffs on exports to the United States under President Donald Trump.

Senior officials of Southeast Asian countries were meeting this week in Manila, the Philippines, where they were expected to discuss ways to counter the shock from higher energy costs.

“Oil prices will reach a peak at some point –- maybe they already have, maybe there’s more to come -– but they are likely to fluctuate at elevated levels for weeks, perhaps months,” Ipek Ozkardeskaya of Swissquote said in a commentary. “Eventually -– even if the war persists –- energy prices will likely come down. But during this period, high energy prices will revive inflation globally and weigh notably on growth.”

On Friday, the S&P 500 dropped 1.3% after a report showed U.S. employers cut more jobs last month than they created and after oil prices shot above $90 per barrel. The combination of a weak economy and high inflation is a worst-case scenario for investors because the Federal Reserve has no good tool to fix both problems at the same time.

The Dow plunged as many as 945 points before finishing with a loss of 453, or 0.9%, and the Nasdaq composite sank 1.6%.

Early Monday, the U.S. dollar, which retains its status as a safe haven for investors bracing against uncertainty, gained against other major currencies. It was trading at 158.46 Japanese yen, up from 158.09 yen late Friday. The euro rose to $1.1558, up from $1.1556.

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Associated Press writer Kim Tong-hyung contributed from Seoul, South Korea.

Oil prices have surged past $100 a barrel amid the fallout of the United States and Israel’s war on Iran.

Brent crude, the international benchmark, rose more than 20 percent on Sunday, at one point topping $114 a barrel, as fears grew of prolonged disruption to global energy supplies.

After moderating slightly, the benchmark was hovering around $107.50 as of 02:30 GMT on Monday.

The surge marked the first time oil rose above $100 per barrel since Russia’s 2022 invasion of Ukraine.

US President Donald Trump, who campaigned heavily on cost-of-living concerns in the 2024 election, brushed off the spike in prices.

“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace,” Trump said in a post on Truth Social.

“ONLY FOOLS WOULD THINK DIFFERENTLY!”

US Secretary of Energy Chris Wright also downplayed the prospect of rising energy prices earlier on Sunday, telling CBS News’ Face the Nation programme that any increase in prices at the petrol pump would be “temporary”.

Crude oil prices have surged by about 50 percent since the US and Israel launched joint strikes on Iran on February 28.

Iran has brought shipping in the Strait of Hormuz to an effective halt in retaliation, threatening about one-fifth of the global oil supply.

Iraq, the United Arab Emirates and Kuwait, three of the biggest producers in The Organization of the Petroleum Exporting Countries (OPEC), have cut production amid an accumulating backlog of barrels with nowhere to go due to the effective closure of the waterway.

Attacks on energy production facilities in the region have further threatened supplies.

Iran has been blamed for multiple attacks on energy facilities across the Gulf, including in Qatar, Saudi Arabia and Kuwait.

On Saturday, Israel carried out air strikes targeting Iran’s oil infrastructure for the first time since the start of the war.

The strikes hit four oil storage facilities and an oil production transfer centre in Tehran and the province of Alborz, according to Iranian state media.

Iran’s Revolutionary Guard Corps (IRGC) on Sunday threatened to target energy facilities across the region in retaliation, warning that oil could soar to $200 a barrel if the US and Israel “continue this game”.

Stocks in Asia fell sharply on Monday morning, as investors braced for the fallout of rising energy prices.

Japan’s Nikkei 225 tumbled more than 7 percent in early trading, while South Korea’s KOSPI plunged more than 8 percent.

In Hong Kong, the Hang Seng Index fell by nearly 3 percent.

US stock futures, which are traded outside of regular market hours, also saw substantial losses.

Futures tied to Wall Street’s benchmark S&P 500 fell by 1.7 percent, while those for the tech-heavy Nasdaq Composite dropped by 1.90 percent.

While Trump administration officials have insisted that the war will be over within weeks, the prospect of prolonged disruption to global energy supplies has stoked fears of higher inflation and slowing economic growth.

The International Monetary Fund has estimated that every sustained 10 percent rise in oil prices results in a 0.4 percent rise in inflation and a 0.15 percent reduction in global economic growth.

“If the shock proves short-lived, the global economy can quickly recover,” Mike O’Rourke, chief market strategist at JonesTrading, told Al Jazeera.

“If oil remains at these levels for several weeks, it will be a major global headwind. Thus far, markets have underestimated the risks related to the conflict in Iran.”

In an interview published by The Financial Times on Friday, Qatari Minister of Energy Saad al-Kaabi warned that all of the region’s producers could soon be forced to halt production and that prices could hit $150 a barrel.

“Everybody that has not called for force majeure we expect will do so in the next few days that this continues,” Al-Kaabi told the newspaper.

“All exporters in the Gulf region will have to call force majeure.”