Markets rocked as oil price spikes on Yemen violence
MARKETS were yesterday shaken by the prospect of an end to the era of super-cheap oil after air strikes on rebels in Yemen by Saudi Arabia and its allies threatened to disrupt world oil supplies.
Brent crude – a North Sea benchmark – jumped 4.5 per cent to $59 a barrel. West Texas Intermediate (WTI) – another benchmark oil price – climbed to $51.3 a barrel, a 4.2 per cent gain.
It had an immediate impact on the share price of firms dependent on fuel such as airlines. Easyjet, Ryanair and International Airlines Group saw their share prices drop by 2.8, 1.67 and 3.37 per cent respectively. Some market-watchers also suggested they were down after the Germanwings plane disaster.
The FTSE 100 – an index that tracks the biggest 100 UK companies – fell by 1.37 per cent and ended the day at 6895.33 points. It is now 2.02 per cent below its record close of 7037.67 reached on Monday. Gold prices jumped by a half a per cent to $1,202.80 an ounce in a sign investors were rushing into safer assets.
“The advance in WTI is an interesting one because Yemen is not an oil producer of great significance,” said Jameel Ahmad, chief market analyst at FXTM. “In fact, it was previously only seen as the 39th largest producer of oil. The major reason for the sudden intrigue from investors is because Yemen’s geographic location is extremely close to Saudi Arabia and this nation, among others, getting involved in the escalating conflict has encouraged suspicions that oil production in the Middle East region might be disrupted.”
Stocks also declined across the continent with the Euro Stoxx 50 – an index of 50 major European companies – closed 0.4 per cent lower.
Risky technology shares suffered with the Stoxx Europe 600 technology index – a group of 600 technology companies – down 1.6 per cent. In the US, the Dow Jones Industrial Average and the Nasdaq closed at losses of 0.23 and 0.27 per cent respectively.