Oil prices fell on Monday as market concerns about a widening Middle East conflict subsided, even as Israel and Iran exchanged missile strikes for a fourth consecutive day.
The retreat came despite initial price spikes following Israel’s surprise attack on Iranian military and nuclear sites last Friday, which had briefly sent crude prices soaring by as much as 13%.
Gold prices, however, climbed toward record highs as investors sought safe-haven assets, while global equities showed mixed performance amid cautious optimism that the conflict would remain contained.
Market Reactions and Central Bank Watch
Investors are closely monitoring upcoming central bank meetings, particularly those of the U.S. Federal Reserve and the Bank of Japan, as well as ongoing trade negotiations aimed at averting former President Donald Trump’s proposed high tariffs.
Tony Sycamore, a market analyst at IG, warned that sustained high oil prices could reignite inflationary pressures. “The knock-on impact of higher energy prices is that they will slow growth and cause headline inflation to rise,” he said. “While central banks would prefer to overlook a temporary spike in energy prices, if they remain elevated for a long period, it may feed through into higher core inflation as businesses pass on higher transport and production costs.”
Allen Good, Morningstar’s director of equity research, noted that oil markets remain well-supplied, with OPEC increasing production and demand softening. “A larger war is unlikely. The Trump administration has already stated it remains committed to talks with Iran,” he said.
Global Stock Markets Show Mixed Performance
Asian markets were divided, with Tokyo’s Nikkei 225 rising 1.3% thanks to a weaker yen, while Hong Kong reversed early losses to close 0.7% higher. Shanghai, Seoul, and Wellington also posted gains, but Taipei, Jakarta, Bangkok, and Manila retreated. European markets, including London, Paris, and Frankfurt, edged higher.
Gold surged to around $3,450 an ounce, nearing its all-time high of $3,500, as investors sought stability amid geopolitical tensions.
Corporate and Economic Developments
Nippon Steel shares rose over 3% after Trump approved its $14.9 billion merger with U.S. Steel, ending a prolonged acquisition saga. Meanwhile, China’s factory output growth slowed in April due to trade war pressures, though retail sales exceeded expectations.
The G7 summit in Canada is also in focus, with discussions expected on Middle East tensions and trade policies following Trump’s tariff announcements.
Key Market Figures (at close):
– Brent Crude: DOWN 0.4% at $73.95/barrel
– WTI Crude: DOWN 0.2% at $72.82/barrel
– Nikkei 225 (Tokyo): UP 1.3% at 38,311.33
– Hang Seng (Hong Kong): UP 0.7% at 24,060.99
– Shanghai Composite: UP 0.4% at 3,388.73
– FTSE 100 (London): UP 0.3% at 8,874.0
– Dow Jones (New York): DOWN 1.8% at 42,197.79
Currency Movements:
– Euro/Dollar: UP at $1.1581
– Pound/Dollar: UP at $1.3583
– Dollar/Yen: UP at 144.26 yen
Analysts remain cautious ahead of the Fed’s policy meeting, with Chris Weston of Pepperstone noting, “The Fed should remain sufficiently constrained by the many uncertainties to offer anything truly market-moving.”
While oil markets stabilize for now, the risk of prolonged Middle East tensions could keep energy prices volatile in the coming weeks.
