Price of edible oils and cereals also rise
Oil prices rose about 25% on Monday, hitting their highest level since mid-2022, and Brent crude is on track to post a record single-day rise, while gold fell 2% amid the escalating conflict with Iran, which has affected global energy supplies, boosted the dollar and dampened hopes of interest rate cuts, Reuters news agency reported.
In the face of these developments, Donald Trump says it is “a small price to pay” and gave assurances that oil prices “will fall rapidly once the destruction of the Iranian nuclear threat is completed.”
Agriculture markets led by edible oil prices have also risen as a result of the extensive use of vegetable oils in making of biofuels.
Aluminum strengthened amid supply concerns, even as other metals struggled due to the dollar’s appreciation.
“The backlash stems from the fact that markets see no obvious way out of the escalating Middle East conflict and has now reached a high-stakes stalemate in which neither side seems willing to give up first,” said Tony Sycamore, market analyst at IG.
“The risk of more lasting economic damage continues to increase day by day,” the expert warned.
Iran on Monday named Mojtaba Khamenei as his father’s successor, Ali Khamenei, as supreme leader, signaling that a week after the start of the conflict with the United States and Israel, the hard line remains firmly in power in Tehran.
THE INCREASE IN THE PRICE OF OIL LEADS TO AN INCREASE IN THE PRICE OF VEGETABLE OILS AND CEREALS
Brent crude was on track for its highest daily growth in history, both in percentage and absolute terms, amid the widening U.S.-Israel conflict with Iran, which has prompted some of the Middle East’s major oil producers to cut supplies and amid fears of prolonged disruption of shipping through the Strait of Hormuz.
Brent crude futures rose to a high of $119.50 a barrel and U.S. West Texas Intermediate (WTI) crude at $119.48 a barrel.
“The situation appears to be deteriorating further,” ING analysts said in a note. “In addition, oil production has started to reduce, with producers facing storage constraints. Iraq, Kuwait and the United Arab Emirates have begun to reduce oil production,” analysts say.
In agricultural markets, Malaysian palm oil rose 9% and Chicago soybean oil rose to its highest level since late 2022, supported by rising crude oil prices.
The price of wheat has risen to the highest level since June 2024, and the price of corn has reached the highest level in the last 10 months.
WHY GOLD IS DECREASING
Gold fell more than 2% as the dollar appreciated, which hurt the price of dollar-denominated bullion, while higher energy costs fueled inflation fears and further dampened the prospects of a short-term interest rate cut.
The dollar held close to last week’s three-month high, making bullion more expensive for holders of other currencies.
Oil-driven inflation fears and delayed expectations of interest rate cuts likely strengthened yields in the U.S. and the dollar, outpacing safe-haven demand and pushing gold lower.
ALUMINIUM RISES DUE TO SUPPLY DISRUPTIONS
Aluminium hit a four-year high amid rising supply fears over the Middle East war.
The three-month benchmark aluminum on the London Metal Exchange reached its highest level since March 2022 at $3,544 per tonne.
Qatar’s Qatalum smelter and Aluminium Bahrain have already declared force majeure for deliveries amid rising tensions in the Middle East.
Other base metals were affected by the dollar’s appreciation.
“A VERY SMALL PRICE TO PAY”, ACCORDING TO DONALD TRUMP
While the price of a barrel of oil exceeded $115 tonight due to the conflict in the Middle East, the US president assured Truth Social that oil prices “will fall rapidly once the destruction of the Iranian nuclear threat is completed”.
As the unprecedented price hike worries world leaders and is already hurting American consumers, Donald Trump reacted quickly on his Truth Social network, declaring that this increase is “a very small price to pay for the peace and security of the United States and the world.”
“Only fools can think otherwise,” the US president added, assuring that oil prices “will fall rapidly once the Iranian nuclear threat is eliminated”.
On Friday, the U.S. Development Agency (DFC) announced the implementation of a reinsurance mechanism to facilitate coverage of risks related to the crossing of the Strait of Hormuz, worth up to $20 billion. The United States is currently working with shipowners who want to take their tankers out of the Persian Gulf, US Energy Secretary Chris Wright insisted on Sunday, quoted by AFP.
“At first, these ships will probably be under U.S. military protection,” he added, predicting a return of traffic to normal “in the relatively near future.” But these signals have not been enough to calm down: for fear of attacks, traffic remains almost paralyzed in the straits – media reports mentioning only the passage of a few ships identified as Chinese.
“Supply disruptions are intensifying, with vessel tracking data confirming the halt in maritime traffic,” observes Lloyd Chan, of MUFG bank, speaking of the “oil shock”.
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