Oil prices saw their biggest daily gain since the 1991 Gulf War on Monday after weekend drone attacks on two Saudi oil facilities halved output in the world’s top crude exporter, fuelling fresh geopolitical and growth fears.
Europe’s benchmark Brent crude surged by 20 per cent and US counterpart WTI by 15 per cent as commodities trading got underway and after President Donald Trump warned that the US was “locked and loaded” to respond to the attacks that Washington blamed on Iran.
Both contracts later came off their peaks but were still up more than 10 per cent on the day by the mid-afternoon in Europe.
The price surges weighed across world stock markets on fears that a sustained higher cost of crude could impact already weak global economic growth.
“Growing tensions in the Middle East are another headwind for the global economy in already uncertain times, and a full-blown conflict could trigger another leg in the global downturn,” said Jennifer McKeown, head of Global Economics at Capital Economics.
However, share prices of energy majors jumped, with traders seeing higher profits down the line for the likes of BP and Shell.
In foreign exchange, the dollar was down against the yen and up against the euro, while the pound slid, with the EU saying that Britain had no viable Brexit proposals after Prime Minister Boris Johnson held Brexit deal talks with EU chief Jean-Claude Juncker.
Gold, which along with the yen is seen as a haven in times of geopolitical and economic unrest, rose.
Markets’ focus was firmly on oil however after the weekend attack that was claimed by Tehran-backed Huthi rebels in neighbouring Yemen, where a Saudi-led coalition is bogged down in a five-year war.