Oil now heading for biggest weekly rise since 2020
This morning’s surge in oil prices has positioned Brent crude for its largest weekly increase since early in the Covid-19 pandemic.
Brent crude has risen to $87.66 a barrel, up more than 2.5% today, marking a weekly gain exceeding 20% and reaching its highest level since July 2024.
This would represent the largest weekly increase since the week ending 1 May 2020.
Prices are climbing following warnings from Qatar’s energy minister that the ongoing war in the Middle East could "bring down the economies of the world." He predicted that all Gulf energy exporters would halt production within weeks, potentially driving oil prices to $150 a barrel.
"Everybody that has not called for force majeure we expect will do so in the next few days that this continues. All exporters in the Gulf region will have to call force majeure. If they don’t, they are at some point going to pay the liability for that legally, and that’s their choice."
He also noted that even if the conflict ended immediately, Qatar would require "weeks to months" to resume normal delivery cycles after an Iranian drone strike targeted its largest liquefied natural gas plant.
Meanwhile, Britain’s top energy regulator is set to assume a new role heading the government department responsible for the energy sector.
Ofgem announced that its CEO, Jonathan Brearley, will step down at the end of March to become Permanent Secretary at the Department for Energy Security and Net Zero (Desnz).
During Brearley’s leadership, the regulator faced criticism for its approach, particularly regarding its policy to open the market to smaller suppliers. This approach was challenged when wholesale energy price spikes forced some suppliers to close.
Brearley will join Desnz amid ongoing ministerial discussions about potential interventions to shield the public from soaring household energy bills if the Middle East conflict persists.
Oxford Economics estimates that the Middle East conflict will add 0.4 percentage points to UK inflation in 2026.
"Higher oil prices will quickly feed through to petrol prices, while a rise in European gas prices will see a sharp increase in household energy bills in July. We will nudge down our below-consensus GDP growth for 2026, as the weaker picture for real incomes weighs on consumer spending." – Edward Allenby, Senior Economist, Oxford Economics
Oil now at $89 a barrel
Brent crude is approaching the $90 per barrel mark for the first time since April 2024.
Persistent geopolitical tensions and Qatar’s warning that all Gulf energy exporters may cease production within weeks if the Iranian conflict continues have propelled energy prices upward.
Qatar’s energy minister told the Financial Times that the Middle East war "could bring down the economies of the world," impacting growth, increasing energy bills, and causing product shortages.
European gas prices are also rising. The UK month-ahead gas contract increased by 2% to 134p per therm, while the continental European month-ahead contract rose 2.8% to €52 per megawatt hour.
International Energy Agency Executive Director Fatih Birol cautioned against relying on Russia for gas supplies, citing economic and political risks amid the growing global supply of liquefied natural gas (LNG).
"The current crisis in the Middle East has led to questions in some quarters about whether to go back to Russia or not. One of Europe’s historical mistakes was the over-reliance of its energy sources on one single country, Russia." – Fatih Birol, IEA Executive Director
Oil hits $87 a barrel, a 20-month high
Brent crude has reached its highest level in 20 months, trading at $87 a barrel for the first time since 5 July 2024.
This rise intensifies concerns about a potential inflation surge affecting the global economy.
‘Geopolitical uncertainties’ amid Iran war could slow fall in mortgage rates, says Halifax
Halifax has warned that geopolitical uncertainties related to the Middle East conflict could slow the decline of mortgage rates this year. The lender reported a significant easing in house price growth in February.
Halifax, part of Lloyds Banking Group, Britain’s largest mortgage lender, stated that the conflict is likely to impact global economies and reduce the likelihood of interest rate cuts that influence borrowing costs for homebuyers.
The value of a typical UK home rose by 0.3% in February to £301,151, a notable slowdown compared to the 0.8% growth recorded in January.
House price growth declined from 0.8% in January to 0.3% in February according to Halifax’s House Price Index (HPI). However, annual growth increased to 1.3%, the strongest in four months, driven primarily by Northern regions; Northern Ireland saw average prices rise by 6.3% over the past year.
Seafarer: ‘We’re powerless … and hoping nothing hits us’
interviewed a crew member aboard one of the tankers stranded in the Gulf, which typically transports large volumes of oil from the Middle East to global ports.
"When [Donald] Trump said Iran had 10 days to agree to his deal or bad things would happen, I did the math and thought we might get stuck here. And we did."
From a cabin below deck, the crew member described watching explosions illuminate the sky while loading crude oil at an industrial complex in the Gulf.
UK interest rate cut in March now looking highly unlikely
The probability of a UK interest rate cut in March has diminished significantly.
City money markets now assign only a 16.5% chance of a cut, down from 80% last week before the Iran conflict escalated.
Markets currently price in just 21.5 basis points (0.215 percentage points) of cuts by December, indicating that a full quarter-point cut is no longer fully anticipated.
Michael Saunders of Oxford Economics, a former Bank of England policymaker, noted that central banks aim to counter risks that energy price shocks could influence inflation expectations.
"Our updated assumptions assume the energy price shock is relatively short-lived, but the effects on inflation and risks of second-round impacts will be greater if the conflict is more drawn out. Against this backdrop, the Bank of England’s Monetary Policy Committee is likely to remain on hold for now, keeping policy in restrictive territory."
The oil price continues to rise this morning, with Brent crude up 0.37% at $85.75 a barrel, nearing the $86 per barrel level reached yesterday for the first time since July 2024.
The Iran conflict has also caused a sharp increase in crude oil stored on tankers at sea.
This week’s closure of the Strait of Hormuz has triggered a scramble for alternative supplies, supporting a dramatic surge in tanker rates, Brent-Dubai exchange-for-swap spreads, and oil-on-water in the region.
Asian markets are particularly exposed to ongoing disruptions, as the majority of crude and product cargoes passing through the Strait historically head to the Asia-Pacific region, although Europe also depends on Middle Eastern imports for jet fuel and diesel.
Recent sanctions on Russia had driven India’s crude purchases and Europe’s product imports further toward the Middle East prior to the conflict. Amid shifting trade flows, incentives exist for India and China to increase purchases of discounted Russian oil.
Reports this week indicated that Indian refineries and Russian officials were exploring increased trade, a move seemingly supported by the White House, which announced a temporary easing of punitive measures on some Russian oil sales to India.
Rising energy prices reduce the likelihood of central bank interest rate cuts, according to Jim Reid of Deutsche Bank.
"With oil prices continuing to rise, investors grew more doubtful about central bank rate cuts this year, with the prospect of hikes even coming into view. That was particularly clear for the ECB, where a hike by December moved up to a 63% chance by the close [yesterday], the first time in 2026 it’s been above 50%. A 55% probability of a cut was priced in as recently as last Friday."
Gold, traditionally a safe-haven asset, has declined over 3% since the Iranian conflict began, partly due to a rally in the US dollar. Today, gold is up 0.7% at $5,112 an ounce.
IMF: 10% oil rise for a year would add 40bps to inflation
International Monetary Fund Managing Director Kristalina Georgieva warned that a sustained 10% increase in energy prices over a year would raise global inflation by 40 basis points and reduce economic growth by 0.1-0.2%.
"The world economy has been remarkably resilient. Shock after shock, and yet growth is at 3.3%. But this resilience is being tested yet again."
In related energy developments, the US has granted Indian refiners a 30-day waiver to purchase Russian oil following the US-Israel conflict with Iran.
US Treasury Secretary Scott Bessent emphasized that this temporary waiver, intended "to enable oil to keep flowing" into the market, "will not provide significant financial benefit to the Russian government."
Asia-Pacific markets face steep weekly losses amid Iran war
After a volatile week, Asia-Pacific stock markets are on track for their worst weekly performance since the Covid-19 pandemic began.
MSCI’s broadest index of Asia-Pacific shares excluding Japan is set for a 6.6% weekly decline, the steepest since March 2020, according to .
Today, Australia’s S&P/ASX 200 index dropped 1%, while Japan’s Nikkei rose 0.6%, and Hong Kong’s Hang Seng increased by 1.6%.
Introduction: Oil heading for biggest weekly gain in four years
Good morning, and welcome to our continuous coverage of business, financial markets, and the global economy.
The oil price is on course for its largest weekly gain in four years, raising concerns about an inflation surge that could exacerbate the cost of living crisis and hamper global growth.
The Iran conflict has driven Brent crude, the international benchmark, to soar by 17.65% this week to over $85 a barrel. This would be the largest weekly increase since the week ending 4 March 2022, following Russia’s invasion of Ukraine.
Oil prices have reached their highest levels in 19 months due to supply concerns after attacks on regional refineries and ships by Iran this week.
Ship traffic through the Strait of Hormuz has nearly halted, according to the Joint Maritime Information Center (JMIC), a multinational naval advisory group.
JMIC reported only two confirmed commercial transits through the strait in the past 24 hours, both cargo ships rather than tankers.
Under normal conditions, approximately 138 vessels pass through the strait every 24 hours. Currently, many vessels remain anchored, drifting, or berthed in Arabian Gulf ports.
JMIC’s security threat rating for the area remains "CRITICAL," indicating that an attack is almost certain.
The agenda
- 7am GMT: Halifax house price index for February
- 1.30pm GMT: US non-farm payrolls employment data for February
- 1.30pm GMT: US retail sales report for January
