Oil prices soar and stocks fall as conflict escalates

Vessels were forced to anchor due to Iran’s threat to close the Strait of Hormuz

Global oil prices have risen due to continued attacks by Iran in the Middle East in response to ongoing attacks by the US and Israel.

Brent crude, the global benchmark for oil prices, rose 10% to more than $82 per barrel on Monday after at least three ships were attacked near the Strait of Hormuz over the weekend. Natural gas prices also soared, rising by up to 25%.

Iran warned vessels not to transit the important waterway in the south of the country, through which around 20% of the world’s oil and gas passes.

In London, the FTSE 100 stock market index opened down almost 1% as airline shares tumbled after the closure of airspace in the Middle East.

Major European stock markets suffered steeper falls. In France, the CAC-40 fell 1.6%, while the German Dax fell 1.7%.

However, the price of gold, considered a safe haven asset in periods of uncertainty, rose 2.3% to US$5,395.99 an ounce.

International shipping has come to a virtual standstill at the entrance to the Strait of Hormuz, and analysts warn that a prolonged conflict could drive energy prices even higher.

The UK Maritime Trade Operations Center (UKMTO) reported that two vessels were hit and that an “unknown projectile” had “exploded very close” to a third.

After the initial rise, Brent crude fell to $79 a barrel, while US-traded oil rose about 7.6% to $72.20.

“The market is not panicking,” Saul Kavonic, head of energy research at MST Marquee, told the BBC. “There is more clarity that, to date, oil transportation and production infrastructure has not been a primary target for either side,” he added.

“The market will be watching for signs that traffic through the Strait of Hormuz returns, which would cause oil prices to fall again.”

Oil prices soar after attacks on Iran

Brent oil price in US dollars per barrel

But some analysts warned that the value could exceed $100 in the event of a prolonged conflict, which could have a ripple effect on inflation and interest rates.

Robin Mills, chief executive of Dubai-based consultancy Qamar Energy and a former executive at oil giant Shell, said: “The rise in prices will be reflected almost immediately because oil traders are also closely following the news.”

“At the moment, oil prices are not particularly high, they are still below the levels of two years ago, so we are not yet in the full oil crisis.”

On Sunday, the OPEC+ group of oil-producing countries agreed to increase their production by 206,000 barrels a day to help cushion any price rises, but some experts doubt this will be of much help.

Edmund King, president of the AA, warned that the disruption could increase gasoline prices around the world.

“The instability and bombings across the Middle East will certainly be a catalyst to disrupt the distribution of oil globally, which will inevitably lead to price increases,” he said.

“The magnitude and duration of fuel price increases depend on how long the conflict lasts.”

Subitha Subramaniam, chief economist and director of investment strategy at Sarasin & Partners, said that if oil prices remain high for a prolonged period: “It will start to affect other prices such as food, agricultural products and industrial commodities, which will certainly worsen inflation.”

The pace of inflation has been decreasing in the United Kingdom, which has led the Bank of England to reduce interest rates.

Subramaniam suggested that the Bank may choose to keep interest rates unchanged at 3.75% for now, despite having recently signaled that further cuts could be made.

On Sunday, Iran’s Islamic Revolutionary Guard Corps (IRGC) said three oil tankers from the United Kingdom and the United States were “hit by missiles and are on fire.” The United Kingdom and the United States have not commented on the matter.

The UKMTO said “multiple security incidents” had been reported in the Persian Gulf and Gulf of Oman, and advised ships to “transit with caution”.

At least 150 oil tankers have dropped anchor in open Gulf waters beyond the Strait of Hormuz, although some Iranian and Chinese vessels passed through there today, according to ship tracking platform Kpler.

“Due to threats from Iran, the strait is effectively closed,” Homayoun Falakshahi of Kpler told BBC News.

“Vessels have taken the precautionary measure of not entering, as the risks are too high and their insurance costs have skyrocketed.”

He said the U.S. would likely try to protect shipping lanes, which, if effective, would prevent a spike in oil prices, but if the strait remained closed for an extended period, prices could rise “much, much higher.”

Danish container shipping group Maersk said in a statement on Sunday it would suspend sailings through the Bab el-Mandeb Strait and the Suez Canal and reroute ships around the Cape of Good Hope.

Originally published by BBC News on 02/03/2026

By Daniel Thomas, Ben Hatton, Peter Hoskins and Dearbail – Jordan