Oil touches $100 a barrel, shares skid after attacks on Gulf shipping, Iran warnings

By Lawrence Delevingne and Niket Nishant

BOSTON/LONDON, March 12 (Reuters) – Global shares fell on Thursday as attacks on oil tankers in the Gulf and warnings from Iran shattered prospects of an imminent de-escalation in the Middle East conflict, pushing oil prices to around $100 a barrel and stoking fresh inflation concerns.

Wall Street’s stock indexes slumped, dragged down by rising oil prices and concerns about the private credit market. The Dow Jones Industrial Average and the S&P 500 dropped about 1.2%, and the Nasdaq Composite lost 1.4%.

The STOXX 600 pan-European equity benchmark slipped 0.66%. The MSCI All-World index fell 1.2%.

Brent crude futures jumped as much as 10.4% to $101.59 a barrel, before trimming gains, as doubts persisted over whether reserve releases would be enough to cushion the hit from the Middle East supply shock.

U.S. crude futures were last trading 8.7% higher at $94.85 a barrel, and Brent last stood just under $100 a barrel.

Monica Guerra, head of U.S. policy at Morgan Stanley Wealth Management, said in a report Thursday that geopolitically driven equity volatility is historically short-lived. But, if higher oil prices persist, “the Fed’s reaction function could be complicated, supporting a higher fed funds rate for longer.”

IRAN WARNS OF MORE ATTACKS AS STRIKES ON TANKERS CONTINUE

Iran will avenge the blood of its martyrs, keep the Strait of Hormuz closed and attack U.S. bases, new Supreme Leader Mojtaba Khamenei said on Thursday in a statement read out on state television, his first remarks since succeeding his slain father.

Earlier, two fuel tankers in Iraqi waters were struck by explosive-laden Iranian boats, Iraqi security officials said, while an Iraqi official told state media that its oil ports “have completely stopped operations.”

“The market remains very concerned in terms of what’s going on in the Strait of Hormuz, and basically, information that we are getting over the last 24 hours is not a good reading,” said Rodrigo Catril, a senior FX strategist at NAB. 

Iran had earlier stepped up attacks on merchant ships in the Strait of Hormuz, increasing the number of ships struck in the region since fighting began to at least 16. Tehran has warned the world to get ready for oil at $200 a barrel, although U.S. Energy Secretary Chris Wright said on Thursday global oil prices are unlikely to hit that price.

INFLATION RISKS 

Data on Wednesday showed the U.S. consumer price index rose 0.3% in February, in line with forecasts and above January’s 0.2% increase. The report was not regarded as particularly relevant given the Iran war has started to fuel inflation.  

In bond markets, the risk of rising inflation outweighed safe-haven considerations to push yields higher globally. Yields on 10-year Treasury notes rose 4.3 basis points to 4.249%, having jumped 7 bps overnight. 

Also worrying markets was the $2 trillion private credit market after Swiss private equity firm Partners Group warned default rates could double in the next few years.

Morgan Stanley fell 4% after limiting redemptions at one of its private credit funds following similar actions by Blackstone and BlackRock earlier this month. Blackstone and BlackRock were down 3.8% and 2.3% respectively.

The U.S. Federal Reserve will cut interest rates for the first time this year in June, according to economists polled by Reuters. Nearly 40% expect just the one rate reduction or none this year, almost double the share predicting three or more.

Nervous investors sought the liquidity of dollars while shunning currencies from countries that are net energy importers, including Japan and much of Europe.

The euro slipped 0.4% to $1.1520. The dollar was slightly stronger at 159.21 yen.

(Reporting by Lawrence Delevingne in Boston, Niket Nishant in London and Stella Qiu in Sydney; Editing by Mark Potter and Kirsten Donovan)