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Oil prices jump after top Iranian general killed by US
  Monday 06 January, 2020
Oil prices jump after top Iranian general killed by US

Oil prices have risen sharply after the killing of a top Iranian general in Iraq.

Analysts warned the action could escalate tensions in the region and affect global oil production.

The price of Brent crude jumped by more than 3% and at one point hit $69.50 a barrel, the highest since September.

It came after General Qasem Soleimani was killed in a US drone strike at Baghdad airport, which the Pentagon described as "defensive action".

The price spike pushed oil stocks on the London stock exchange higher, with BP up 2.7% and Royal Dutch Shell nearly 1.9% higher.

Shares in US oil companies such as Exxon Mobil dropped, however, amid a wider US market fall prompted by weak manufacturing data and concerns about the implications of the Middle East conflict.

The Dow and the Nasdaq closed down about 0.8%, while the S&P 500 dropped by 0.7%. The declines followed record highs a day earlier.

"2020 opened on a very positive note," said Aneeka Gupta of WisdomTree Investments. "This event has actually stalled the bullish optimism we've seen."

Sanctions
Tensions between the US and Iran have been rising since 2018, when the US pulled out of a nuclear deal meant to curb Iran's nuclear programme and prevent the country from developing nuclear weapons.

The US also re-imposed sanctions on Iran, a move that has shattered the country's economy and severely restricted its oil exports.

This recent strike has sparked fears of increased risk to energy supplies in the region. The price of the international benchmark, Brent Crude, climbed 3.5% on Friday, while US oil - known as West Texas Intermediate - increased about 3%.

That rise is somewhat muted, suggesting that investors expect the reaction to the killing will be contained, said Adnan Mazarei, senior fellow at the Peterson Institute for International Economics and former deputy director for the Middle East at the International Monetary Fund.

But if the strike leads to wider military confrontation, as he expects, that could prompt an even bigger spike in prices.

"It is not likely that this issue will just die out," he said. "I expect the most likely scenario is a pick-up in the tensions ... and if that happens, [there will be] a more sustained increase in the price of oil."

The Middle East is home to several of the world's biggest oil producers, including Iraq, where the US and Iran have clashed before.

As much as a fifth of global supplies pass through the Strait of Hormuz, a narrow passage which provides access to the Persian Gulf.

Source: https://www.bbc.com/news/business-50982313

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