Oil prices spike over 5 pc as worries grow over Hormuz

HONG KONG: Oil prices surged more than 5% on Tuesday as several countries pushed back against Donald Trump's demand that they help secure the key Strait of Hormuz, while Iran continued to target crude-producing neighbours.

They recovered the previous day's sharp losses, which came after the head of the International Energy Agency (IEA) said more stockpiles could be tapped if needed.

Still, most equities extended Monday's gains as tech firms rallied after Nvidia said it expected to make at least $1 trillion in revenue through to the end of 2027.

Investors are also awaiting a slew of central bank decisions this week that analysts say could see a resumption of interest-rate hikes aimed at offsetting a possible spike in inflation caused by the surge in crude prices.

Australia said on Tuesday it had lifted borrowing costs because of 'sharply higher fuel prices'.

Trump has called for allies in Europe and elsewhere to help reopen the Strait of Hormuz, which Iran has effectively closed, saying at the weekend that securing the waterway 'should have always been a team effort, and now it will be'.

But on Monday there was only a lukewarm response, with German Chancellor Friedrich Merz saying the war started by US-Israeli strikes on Iran was 'not a matter for NATO', while Britain, Spain, Poland, Greece and Sweden all distanced themselves from the calls.

Australia and Japan also opted not to join.

The US president told the Financial Times on Sunday that it would be 'very bad for the future of NATO' if the allies refused to help, and said on Monday that he had asked to delay a summit with Chinese leader Xi Jinping by 'a month or so' over the issue.

With the crisis showing no sign of ending soon, both main crude contracts spiked. West Texas Intermediate and Brent each climbed more than 5% above $100 a barrel before easing back slightly.

They had dropped on Monday after IEA chief Fatih Birol flagged that member countries could unlock more oil from strategic stocks 'if needed', after already agreeing last week to a record release of 400 million barrels.

- Low conviction -

Traders were also cheered by news from monitor MarineTraffic that a Pakistani oil tanker became the first non-Iranian tanker to transit Hormuz with its automatic transponder system activated.

But attacks on Middle Eastern oil facilities continued, with explosions heard in Doha on Tuesday and an 'unknown projectile' hitting a tanker off the coast of Oman.

Meanwhile, Israel said it had launched a 'wide-scale wave of strikes' in Tehran as well as attacks on Hezbollah in the Lebanese capital Beirut.

Drones hit major oil fields in the United Arab Emirates and Iraq on Monday.

And a drone and rocket attack targeted the US embassy in Baghdad early on Tuesday, a security official said.

Equities continued to defy the spike in crude, with markets across Asia rising, helped by remarks from Nvidia, which gave investors some relief from events in the Middle East.

Seoul, which had rocketed by around 50% between the start of the year and the start of the war, led gains by rising more than 1%. Taipei, where chip titan TSMC is listed, was up by a similar amount.

Hong Kong, Sydney, Singapore, Taipei, Bangkok, Jakarta and Manila were also well up, though Tokyo and Shanghai dipped, with Mumbai flat.

That came after all three main indexes on Wall Street ended comfortably higher.

However, Pepperstone's Chris Weston said: 'Conviction behind a sustained rally in risk assets remains relatively low, although it is important to stay open-minded to the possibility that momentum could build.'

While the IEA comments and news of the tanker were welcomed, he warned that 'it is difficult to view these developments as a definitive de-escalation or a true circuit-breaker for the energy risk premium'.

- Key figures at around 0700 GMT -

West Texas Intermediate: UP 4.3% at $97.54 per barrel

Brent North Sea Crude: UP 3.7% at $103.88 per barrel

Tokyo - Nikkei 225: DOWN 0.1% at 53,700.39 (close)

Hong Kong - Hang Seng Index: UP 0.1% at 25,861.55

Shanghai - Composite: DOWN 0.9% at 4,049.91 (close)

Euro/dollar: DOWN at $1.1477 from $1.1510 on Monday

Pound/dollar: DOWN at $1.3287 from $1.3327

Dollar/yen: UP at 159.39 yen from 159.14 yen

Euro/pound: UP at 86.39 pence from 86.36 pence

New York - Dow: UP 0.8% at 46,946.41 (close)

London - FTSE 100: UP 0.6% at 10,317.69 (close)

dan/ane

NVIDIA (isin = US67066G1040)

Samsung Electronics (isin = KR7005930003)

SK Hynix (isin = KR7000660001)

INDEX CORP. (isin = JP3153300003)

Dow (isin = US2605431038)

By RSS/AFP