Middle East crisis pushes up oil prices and could drive inflation rises too

"The impact of the deadly and unpredictable conflict in the Middle East on the global economy will be felt most immediately, and keenly, through the rising cost of oil. Prices jumped on Monday, as markets had their first opportunity to digest the weekend's tit-for-tat attacks. A barrel of Brent crude oil was trading at about $79 (59) by lunchtime in London, up about $6 or 8.5% on the day."

"As the economic impact of Russia's invasion of Ukraine underlined, rising energy costs feed through rapidly to consumers' pockets and have wider knock-on effects for the cost of just about everything else. Net energy importers in Asia and Europe, including the UK, will be hit harder by higher prices."

"Tankers are already declining to use the strait of Hormuz, which carries about 20% of global oil supplies with insurers, perhaps not surprisingly, reluctant to provide cover. Some reports on Monday suggested ships are dodging the Suez canal too, as conflict engulfs the wider region. That could push up shipping costs for other goods besides crude."

Middle East tensions have triggered immediate energy market volatility, with Brent crude rising to $79 per barrel and European gas prices surging 38% following weekend attacks. Oil prices have climbed significantly from January's $60 level as US-Iran tensions escalated. Natural gas supplies face disruption through critical waterways, with QatarEnergy halting production at two sites. Energy importers in Asia and Europe, including the UK, face greater economic pressure than the US, which has shale reserves and strategic reserves. Rising energy costs historically feed through to consumer prices and broader economic effects. Shipping disruptions in the Strait of Hormuz, which carries 20% of global oil supplies, and potential Suez Canal avoidance threaten to increase costs for all goods, not just energy.

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