Energy markets remain on alert after the latest developments in the Middle East, as the concerns of governments, investors and citizens intensify after the new turmoil, as a result of the resurgence of the conflict between the United States of America and Iran.
The developments of the last few hours show that the crisis is not only not over, but on the contrary the US-Iran conflict is entering a new dangerous phase (Trump warned of a hard blow to Iran last night), with the Strait of Hormuz remaining at the center of concern and investors trying to assess how far this new conflagration can go.
Oil prices rose significantly yesterday, major oil companies are recording gains on the stock markets, while the rest of the markets appear nervous, since a new energy shock could affect inflation, interest rates and bring new increases in all products. And all this, while most hoped that we had hopefully reached a de-escalation in the Middle East and that uncertainty would slowly decrease.
Trump's statement
US President Donald Trump added fuel to the fire yesterday, as he reversed the climate that had developed in recent days with new statements. He stated in general terms, on the sidelines of the NATO Summit in Turkey, that the end of the conflict with Iran is not progressing according to expectations and - even worse - that the ceasefire no longer exists.
The statements alarmed investors and the concern spread to the markets, disappointing them, since until a few days ago strong investors and analysts believed that the path to de-escalation was irreversible.
The interim agreement between the US and Iran had created the impression that oil flows in the region could normalize in the medium term, but the sudden flare-up of the last 24 hours not only disappointed expectations but put pressure on oil prices.
Trump's statements show that the US does not take a final agreement with Iran for granted, raising concerns that this conflict may have a long sequel.
The Strait of Hormuz in the red
The biggest concern of governments and markets is once again the Strait of Hormuz. It is one of the most critical sea passages in the world, since about 20% of the oil and a significant part of the liquefied natural gas headed to international markets pass through it.
According to Reuters, the US carried out new strikes against Iranian targets on Tuesday night, after Iranian attacks on three merchant ships passing through the Hormuz region. For its part, Iran has announced that it has targeted US military installations in Bahrain and Kuwait.
At the moment, although the Straits have not been closed, navigation is not running smoothly. On the contrary, the concern of shipowners and shipping giants about the safety of tankers has skyrocketed again and at least four oil tankers and LNG carriers have reportedly interrupted their course, avoiding the passage through the Straits. In the event that it is not possible to continue unhindered the movements of ships from the Straits and the wider region, then it is extremely difficult to avoid a new energy shock internationally.
The disturbance in the Straits does not only affect the countries of the region, but the whole planet, the global economy and by extension Cyprus. In addition to the reduction in the quantities of oil and gas transported through the Straits, ship and cargo insurance premiums are increasing and shipping companies are avoiding the area, which increases costs for everyone.
Concern passed to the price
The latest negative developments have already left their imprint on crude oil prices, interrupting, for an unknown amount, their downward trend.
Brent rose by more than 5% on Wednesday, reaching close to $78.4 per barrel, while US WTI moved close to $74.3.
The two indices were at their highest levels since June 22. It had risen about 3% the previous day, following the US decision to revoke the license that allowed sales of Iranian crude. It should be noted that in the previous days oil had fallen below $72 per barrel. Essentially, this shows that the energy market has now moved away from the expectation of de-escalation and moved to the fear of a new crisis and the deterioration has again linked the prices of energy products to geopolitical risk and war turbulence.
Profits for oil companies
Of course, there are some who are profiting from all this turmoil, since the big oil companies recorded significant gains yesterday on the stock exchanges. ExxonMobil rose about 3.8%, Chevron around 3.5%, while Shell had a stock rise of close to 5%. BP also moved upwards, with gains of just over 3%.
Investors are watching
In contrast, other strong stocks fell, as markets appeared more cautious, fearing that the rise in oil could bring a new round of inflation and disrupt central banks' plans to stabilize or even cut interest rates.
Investors are once again faced with a dilemma. On the one hand, tensions in the Middle East may further raise energy costs and hit supply chains more broadly, while on the other hand, a possible return to negotiations and bypassing the new tension could bring prices down again.
This explains the nervousness in the markets, since prices move not only based on supply and demand, but also on the basis of statements, military moves, threats, general concern and estimates for the next day in the Strait of Hormuz.
A paradox is observed in gold prices, since, although it has always been considered a "safe haven" in times of crisis, it is currently under pressure, since the increase in the price of crude oil increases fears of rising inflation and causing pressure on central banks.
Yesterday, the S&P 500 index was down about -0.7% and the Dow Jones Industrial Average about -1.0%. The Nasdaq-100 technology index was also down about -1.1%, while the FTSE 100 (London) lost about -1.0%. The situation in the KOSPI index in South Korea is worse, with values sinking by about -5.4%.
Airlines in the US had difficulties and losses yesterday, as they fell about 2%-4%, on investors' fear that the rise in the price of oil increases fuel costs and reduces companies' profits.
