Global Markets Oil surges on Yemen air strikes, stocks tumble
London: Escalating tensions in the Middle East as Saudi Arabia and its allies launched air strikes on Yemen pushed oil prices up as much as 6 percent on Thursday, and sent world share markets tumbling.
In the currency markets, the dollar fell against traditional safe-havens the Swiss franc and the yen after warplanes from Saudi Arabia and other Arab countries struck Muslim rebels fighting to oust Yemen’s president, and bombed the airport at the capital Sanaa, in a move seen as a bid to check Iranian influence in the region.
Arab producers ship oil via the narrow Gulf of Aden before heading to the Suez Canal and to Europe, and the price of Brent crude spiked more than USD3 a barrel to close to USD60, a 2 1/2-week high before steadying at USD59.
U.S. crude saw a similar jump as it topped USD51 a barrel. Wall Street was expected to see the S and amp;P 500 and the Dow Jones Industrial start 0.7 percent in the red, adding to three days of falls that saw both indexes drop below their 2015 starting levels on Wednesday.
“The air strikes in Yemen have really created a risk-off mood,” said Rabobank strategist Philip Marey.
Vertiginous slide in oil prices, from more than USD115 a barrel last June to a low of USD45 in January, has been a major driver of financial markets in the past year and a key factor driving global interest rates down and stock markets up.
European shares followed Asian stocks lower and were showing no sign of a rebound as the start of U.S. trading neared.
The pan-European FTSEurofirst 300 index was down 1.5 percent. In Germany, a major industrial economy heavily dependent on oil imports, the DAX index fell as much as 1.8 percent, while shares in Athens took a 3.5 percent dive after three days of gains as Greek worries returned.
Middle East stocks were mixed as investors weighed the negative implications of the tensions against the benefit of a rise in oil prices.
