Oil soared close to $120 a barrel yesterday before crashing back below $85 last night after Donald Trump claimed his war with Iran was almost ‘complete’.
On another day of turmoil on financial markets, Brent crude jumped nearly 30 per cent to as high as $119.50 in early trading, passing the $100 level for the first time in four years.
But it later sank to as low as $83.66 on hopes the US-Israeli war on Iran might be close to an end before settling around $90.
It marked Brent’s biggest-ever intra-day gain in dollar terms – and its biggest fall.
Shares on Wall Street rallied as oil retreated, with the Dow Jones Industrial Average rising more than 1,000 points from its early lows, to close last night up 0.5 per cent at 47,740.8.
Investors in the UK and Europe will be hoping for a similar change in fortune when trading resumes on this side of the Atlantic today.
Turbulence: The FTSE 100 fell more than 200 points, or 2%, in early trading as the prospect of an energy price inflation shock sparked panic on financial markets
However, they are braced for further turbulence in the days and weeks ahead with oil and gas prices still sharply higher than they were before war broke out.
‘There is still an awful lot of uncertainty out there regarding the duration of the conflict, as well as the duration of the closure of the Strait of Hormuz,’ said Sam Stovall, chief investment strategist at CFRA Research in New York.
‘Seeing such a reversal in price movements indicates that investors are looking for any opportunity to jump back into the equity markets.’
In London, the FTSE 100 fell more than 200 points, or 2 per cent, in early trading yesterday as the surging oil price fuelled fears of an energy price inflation shock and recession.
The blue-chip index clawed back much of its losses, however, closing down 0.3 per cent, or 35.23 points, at 10,249.52, as the oil price started to ease.
Investors are still counting the cost of the conflict, with the FTSE All-Share down 6 per cent since the start of last week, wiping £182billion off the value of Britain’s listed companies.
The rout is proving painful for savers who have money tied up in shares through their pensions, Isas and other investments.
Chris Weston, head of research at Pepperstone, said: ‘It has been an incredibly wild ride for traders and investors to navigate the price action put to them over the past 24 hours, with breathtaking reversals taking place across many parts of the financial markets.’
Analysts warned yesterday that markets are now facing the ‘biggest crisis arguably since Covid’ pushed them into free-fall in early 2020, as economies around the world went into lockdown.
Susannah Streeter, chief investment strategist at broker Wealth Club, said: ‘The spectre of stagflation is hovering, with high inflation and stagnant growth looking increasingly likely unless there’s a rapid de-escalation in the Middle East.’
The losses in London were echoed in Europe, with the Dax losing 0.8 per cent in Germany while, in France, the Cac fell 1 per cent.
Analysts at Goldman Sachs warned the oil price could exceed the record $146 a barrel set in 2008 unless the Strait of Hormuz – a crucial shipping channel – reopens before the end of the month.
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