Conflict in Middle East drives up energy costs, plunges stock markets and strengthens dollar during day of uncertainty

The conflict in the Middle East, which puts at risk a key area for hydrocarbon production and exports, has caused a sharp spike in energy prices on Tuesday, fueled dollar appreciation and dragged stock markets down to significant losses.

The Strait of Hormuz - a strategic passage through which transits about 20% of the oil and liquefied natural gas consumed in the world - remains practically closed: the main shipping lines have suspended their routes due to the rise in insurance premiums, which has fueled fears of an inflationary spike.

Oil prices soar

During Tuesday's session, a barrel of Brent (North Sea) crude oil surged above $85, reaching an intraday high of around $85.10-$85.12, a level it had not reached since July 2024. By 11:30 ET it was up 7.8% to $83.79 per barrel. Meanwhile, the West Texas Intermediate was gaining 8.1% to $77 per barrel.

Stock market setbacks

The main Wall Street indexes were trading with losses of 1% at midday and European bourses suffered marked declines. London fell 2.8%, Frankfurt 3.44% and Paris 3.46%. Madrid lost 4.55% and Milan 3.92%.

In Asia, on the Seoul Stock Exchange where trading resumed after the holiday on Monday, the Kospi index closed down 7.24%. In Tokyo, the flagship Nikkei index fell 3.06% and the Hang Seng index of Hong Kong gave up 1.23%.

Gas price rises

Gas prices continued to rise on Tuesday: the Dutch TTF futures contract - the main natural gas benchmark in Europe - advanced by 20.69%, to 53.71 euros. Since the beginning of the year, it has accumulated an increase of more than 90%.

The European natural gas market soared after QatarEnergy, the state-owned energy company of Qatar, announced on Monday the suspension of its liquefied natural gas (LNG) production following Iranian attacks on facilities at two of its largest processing plants. The European natural gas market surged after QatarEnergy, Qatar's state-owned energy company, announced on Monday the suspension of its liquefied natural gas (LNG) production following Iranian attacks on the facilities of two of its largest processing plants.

Previously, one in Saudi Arabia was also forced to halt part of its operations.

Dollar rally and gold retreat

Investor nervousness about the European economy boosted the dollar, which rose 0.74% against the euro to $1,160 per unit.

In contrast, gold - a traditional safe haven in times of geopolitical tension and inflationary uncertainty - dropped 4.13%, to $5,102.16.