Energy Prices Soar, Stock Markets Slide on Iran War Fallout

Gas prices surged and stocks sank after US and Israeli forces began striking Iran at the weekend © - / US NAVY/US CENTRAL COMMAND/AFP
Gas prices surged and stocks sank after US and Israeli forces began striking Iran at the weekend © - / US NAVY/US CENTRAL COMMAND/AFP
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Energy Prices Soar, Stock Markets Slide on Iran War Fallout

Gas prices surged and stocks sank after US and Israeli forces began striking Iran at the weekend © - / US NAVY/US CENTRAL COMMAND/AFP
Gas prices surged and stocks sank after US and Israeli forces began striking Iran at the weekend © - / US NAVY/US CENTRAL COMMAND/AFP

Oil and gas prices soared, stock markets slid and the dollar firmed on Monday as the widening Iran war shook financial markets across the globe.

European natural gas prices rocketed more than 50 percent after Qatar's state-run energy firm said it had halted liquefied natural gas production following Iranian attacks on facilities at two of its main gas processing bases.

Meanwhile world crude futures surged nearly nine percent on fears of disruption to supplies.

Asian and European stock markets retreated as much as over two percent as investors exited trades in favour of the dollar and gold, seen as safer bets in times of economic unrest, according to AFP.

The greenback jumped nearly one percent against the British pound before paring gains, while the precious metal rose 3.1 percent to $5,410.70 an ounce.

There were sizeable gains to share prices of energy majors and defence companies, with BAE Systems jumping six percent in London.

"Investors are scuttling towards safe havens, seeking shelter as conflict widens in the Middle East," noted Susannah Streeter, chief investment strategist at Wealth Club.

After US and Israeli strikes on Iran over the weekend, Israel bombarded Lebanon on Monday following rocket fire from Hezbollah.

Several American warplanes crashed in Kuwait -- from friendly fire -- and Iran lashed out against the region with missiles as the war expanded.

The bombings have also seen the vital Strait of Hormuz -- through which around 20 percent of global seaborne oil passes -- effectively shut and several ships attacked.

Airline share prices took a battering as carriers were forced to cancel flights -- with Qantas and Singapore Airlines each losing around five percent.

British Airways owner IAG lost 5.8 percent Air France-KLM fell 8.3 percent.

However, energy firms rallied, with Australia's Woodside Energy jumping more than six percent, and PetroChina adding almost four percent.

Shell rose nearly three percent and TotalEnergies more than four percent.

"If higher oil prices persist, it raises the risk of stickier headline inflation," wrote Saxo Markets' Charu Chanana.

This could prove troublesome for US President Donald Trump, who has promised his electorate low prices, as the United States approaches mid-term elections in November.

Rising energy prices, increased shipping costs and loss of revenue for air transport could have "a harmful effect on growth", said economist Eric Dor from the IESEG School of Management in Paris.

"If it's a matter of three days, it's not serious. But if it's over a longer period, then it will have an additional recessionary effect," he told AFP.

In theory, oil-importing countries have reserves, with OECD members required to maintain 90 days' worth of stocks, but prices above $100 cannot be ruled out according to analysts.

If the disruption at Hormuz continues, "no matter how much spare capacity, (it) is not going to fill that gap. That gap is just too big," said Amena Bakr, head of Middle East and OPEC+ research at analysts Kpler.

Key members of the OPEC+ oil cartel on Sunday announced a greater-than-expected increase to production quotas.



Saudi Aramco: Oil Refining Has Been Underinvested

FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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Saudi Aramco: Oil Refining Has Been Underinvested

FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The current oil supply crisis shows there is underinvestment in oil refining as demand holds resilient, Saudi state-owned Aramco's vice president of market analysis and sustainability, Musaab Al Mulla, said on Tuesday.

Around 3 ⁠million barrels per ⁠day of refining capacity closed between 2020 and 2023, Al Mulla said at the S&P Global Energy Middle East ⁠Petroleum and Gas Conference in London.

"Now we realize if you have those refineries you may have definitely mitigated the impacts of the crisis today," he said.

The war in Iran, attacks on energy infrastructure and ⁠Iran's effective ⁠closure of the Strait of Hormuz followed by a US naval blockade, have removed around 14 million bpd of oil supply from Middle East producers to the global market.


OECD Cuts 2026 Global Growth Forecasts Over Mideast War Fallout

A drone view of vessels anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. (Reuters)
A drone view of vessels anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. (Reuters)
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OECD Cuts 2026 Global Growth Forecasts Over Mideast War Fallout

A drone view of vessels anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. (Reuters)
A drone view of vessels anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. (Reuters)

The war in the Middle East has dented economic growth prospects worldwide, with a more severe shock likely if no effective ceasefire is agreed before 2027, the OECD warned Wednesday.

Global economic growth is now forecast to slip to 2.8 percent for 2026 if Gulf exports of oil and gas return to pre-conflict levels in the third quarter, the group of 38 industrialized countries said in its quarterly update.

Previously the OECD had forecast full-year global growth of 2.9 percent.

But if the Middle East war continues into next year, however, global growth could slow to 2.1 percent, the OECD said -- well below the average annual growth of 3.4 percent seen from 2013 to 2019, before the Covid pandemic.

"The longer the disruptions last, the larger the economic and social costs become," the group's chief economist Stefano Scarpetta said in the report.

Many countries would risk falling into recession, he noted, and a drop in investment spending -- "including in energy-intensive AI" -- would likely push up unemployment.

Sustained high prices for energy as well as fertilizer and other key products from hydrocarbon production in the Gulf would weigh especially hard on developing countries that have "higher shares of energy and food in household consumption".

Even if the war sparked by US and Israeli strikes on Iran in late February ends in the coming weeks, the OECD forecast global inflation rising to 4.0 percent this year from 3.4 percent in 2025.

In this "time-limited disruption scenario", the group expects US growth to slow to 2.0 percent this year and 1.8 percent in 2027, after growing 2.1 percent last year.

In the eurozone, where many countries are highly dependent on energy imports, GDP growth will slump to 0.8 percent this year after 1.4 percent last year, assuming a Mideast ceasefire is secured in the coming weeks.


Saudi Non-oil Private Sector Activity Hits 3-month High in May

The Saudi capital, Riyadh (Reuters)
The Saudi capital, Riyadh (Reuters)
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Saudi Non-oil Private Sector Activity Hits 3-month High in May

The Saudi capital, Riyadh (Reuters)
The Saudi capital, Riyadh (Reuters)

Saudi Arabia's non-oil private sector expanded at the fastest pace in three months in May as domestic demand improved and supply chains stabilized, while business optimism remained subdued amid conflict in the region, a survey showed on Wednesday.

The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index, compiled by S&P Global, rose to 52.8 in May from 51.5 in April. The 50 mark separates growth from contraction, Reuters reported.

Output accelerated at the ⁠fastest pace in ⁠three months after March's downturn following the start of the Iran war, as firms cited normalizing working conditions, revived contracts and stronger local demand.

Export sales fell for a third straight month, hit by shipping disruption, higher freight and fuel costs, geopolitical tensions and stronger competition. The pace of decline eased only modestly from April's survey-record contraction.

However, supply chains improved, with suppliers' delivery times shortening for the first time in three months as ⁠firms relied ⁠more on local vendors. Backlogs of work rose for an 11th consecutive month, albeit moderately.

“Overall, the latest PMI reading supports the expectation that Saudi Arabia’s non-oil economy will continue its upward trend during the remainder of 2026," said Naif Al-Ghaith, Riyad Bank's chief economist.