Iran Warns To Burn Ships Crossing Strait of Hormuz

Oil and gas prices rose again on Tuesday after an Iranian official warned that his country would “set fire to anyone who tries to pass through” the Strait of Hormuz as tensions between Iran, the United States, and Israel continued to grow.

Brent crude oil increased by 3.2% to $80 per barrel. Gas prices also jumped sharply, rising by 30%.

The increase follows strong gains on Monday, when global markets reacted for the first time to US-Israel strikes on Iran early Saturday and Iran’s retaliation. Investors remain concerned about how the conflict could affect global energy supplies.

Stock markets in Europe and Asia fell further as investors assessed the possible impact of the crisis on financial markets. Many are worried about what the rising energy prices could mean for inflation and interest rates.

In the UK, the FTSE 100 index opened 1.4% lower. Germany’s Dax index also dropped by 1.7%.

Gas prices climbed by about a third to around 140p per therm. Rising gas prices could increase household energy bills and push inflation higher, adding more pressure on consumers.

On Monday, gas prices had already surged after QatarEnergy, one of the world’s largest gas exporters, stopped production following what it described as “military attacks” on its facilities.

Ebrahim Jabbari, an adviser to the commander-in-chief of Iran’s Islamic Revolutionary Guard Corps (IRGC), told state TV that ships “should not come to this region. They will certainly face a serious response from us”.

Shipping through the Strait of Hormuz is crucial to the global economy, with about 20% of the world’s oil and gas passing through the waterway. But they have come to a halt after several vessels were attacked in recent days.

As well as pushing up prices on global energy markets, the conflict has triggered a rise in how much it costs to transport oil.

Hiring a supertanker to move oil from the Middle East to China reached an all-time high on Monday of more than $400,000 (£298,300) almost double the cost last week, according to data from the London Stock Exchange Group.

Sanne Manders, president of logistics technology platform Flexport, told the BBC the Strait of Hormuz is “effectively closed”.

It is partly down to carriers not willing to take the risk, but also due to “insurance companies not being willing to insure this risk anymore”, he told the Today programme.

He added that carriers were likely to start raising rates “for any shipping in the world” in anticipation of higher fuel prices.

Crude oil prices could pass $100 a barrel if the disruption to shipments is prolonged, Srinivaasan Balakrishnan from risk research firm Avellon Intelligence said.

He predicted that if it held at that level US petrol prices could rise by up to 25 cents a gallon.

US President Trump is facing concerns that the conflict in the Middle East could push up the cost of living.

He is scheduled to meet Treasury Secretary Scott Bessent and Energy Secretary Chris Wright on Tuesday to discuss the issue.

Secretary of State Marco Rubio said Washington would announce plans to deal with rising energy prices.

“We knew that going in would be a factor,” Rubio said. “Starting tomorrow you will see us rolling out those phases to try to mitigate against that.”

The UK is also likely to see higher fuel prices if the cost of oil remains high, according to Alasdair Locke, chairman of Motor Fuel Group, the UK’s largest independent forecourt operator.

“With the price of oil going up, that is inevitably going to feed through in due course to higher prices at the pump,” he said.

“It will depend on how long and how high those prices go as to how high the price of fuel will be.”

As well as pushing up fuel prices, higher oil costs can also have a wider impact on the economy by making things such as transport and food more expensive.

If inflation – the pace of price rises – picks up, then this may make central banks less likely to cut interest rates in the months ahead.

In Asia, Japan’s Nikkei closed 3.3% lower, with shares in export‑reliant firms like Toyota, Panasonic and Sony among the hardest hit.

Hong Kong’s Hang Seng and the Shanghai Composite in mainland China were also down.

The Kospi in South Korea, which was shut for a public holiday on Monday, fell by more than 7%.

Seoul’s export-driven economy is especially vulnerable to geopolitical events, with shares of leading firms Hyundai, Samsung and chip company SK Hynix falling by 10%.

Source: BBC