Energy markets faced another day of intense volatility as targeted strikes on Qatari and Saudi Arabian infrastructure sent global oil benchmarks on a turbulent ride. Qatar’s primary liquefied natural gas hub, Ras Laffan, sustained heavy damage following two separate attacks on Wednesday and early Thursday morning.
State-owned giant QatarEnergy confirmed the incidents, describing “extensive further damage” to the facility. Simultaneously, a drone strike hit a refinery in the Saudi Arabian port city of Yanbu, further tightening the risk premium on global supplies.
In the wake of the escalations, Treasury Secretary Scott Bessent suggested a potential shift in American policy to stabilize costs. Bessent noted that the U.S. might lift sanctions on Iranian oil already in transit at sea, a move aimed directly at cooling rapidly rising prices.
Despite these discussions, Brent crude briefly surged to $119 a barrel before settling at $108.65, a 1.2% gain. Meanwhile, the U.S. benchmark, West Texas Intermediate (WTI), bucked the trend by falling 0.2% to $96.14.
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This divergence has pushed the spread between the two benchmarks to a multi-year high, reflecting the vulnerability of seaborne Brent to Middle Eastern disruptions compared to rising domestic inventories in the United States.
The geopolitical tension is echoing through the halls of global central banks. The European Central Bank, along with counterparts in the U.K., Switzerland, and Sweden, opted to keep interest rates steady today, following similar pauses by the U.S., Canada, and Japan earlier in the week.
However, the Bank of England issued a stern warning, stating it remains “prepared to raise rates” to combat inflationary pressures stemming from the ongoing conflict. This hawkish stance sent the 10-year U.K. bond yield climbing to a 14-month high of 4.87%, while the U.S. 10-year Treasury yield rose to 4.281%.
Wall Street felt the weight of these rising yields and energy concerns. The Dow Jones Industrial Average dropped 204 points, or 0.4%, while the S&P 500 and Nasdaq Composite both retreated 0.3%. The precious metals sector took the hardest hit as investors reacted to the prospect of “higher-for-longer” interest rates.
Gold plummeted 5.9% to $4600.70 a troy ounce, and silver tumbled 8.2%. The sell-off was felt acutely by mining stocks, with Newmont shedding 6.9% to become one of the worst performers on the S&P 500.
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