Crude oil prices surged this week as tensions mount between Israel and Iran. This latest escalation raised concerns across global markets, as the Middle East accounts for nearly a third of the world’s crude production, and any fresh conflict could threaten supply chain stability.
Israeli Prime Minister Benjamin Netanyahu said that the attacks on Iran targeted its nuclear program and military capabilities and would last until the threat was removed.
The Prime Minister Sir Keir Starmer said the government urged “all parties to step back and reduce tensions urgently” after the strikes, adding that “now is the time for restraint, calm and a return to diplomacy”.
He said: “The reports of these strikes are concerning, and we urge all parties to step back and reduce tensions urgently. Escalation serves no-one in the region.
“Stability in the Middle East must be the priority, and we are engaging partners to de-escalate. Now is the time for restraint, calm and a return to diplomacy.”
The attack appeared to be the most significant Iran has faced since its war with Iraq in the 1980s.
Sir Keir’s sentiments were echoed by Foreign Secretary David Lammy, who said stability in the Middle East was “vital” for global security.
“Further escalation is a serious threat to peace & stability in the region and in no-one’s interest,” he said in a post on X. “This is a dangerous moment & I urge all parties to show restraint.”
The attack comes at a strained time in UK-Israel relations, following sanctions on two Israeli government ministers and the suspension of trade talks.
The leader of Iran’s paramilitary Revolutionary Guard was killed, Iranian state television reported. Another top Guard official, as well as two nuclear scientists, were also feared dead.
The chief of staff of the Iranian armed forces, General Mohammad Bagheri, was also confirmed dead by Iranian state television.
Oil prices also found support following news that trade talks between the US and China appear to be progressing, with discussions set to continue today. The US also appears willing to ease some tech export restrictions in return for China easing limits on rare earth exports.
Last week, oil prices lodged another weekly gain, despite the announcement from OPEC+ that the group would continue to boost production in July with another 411,000-barrels-per-day hike.
HSBC said its forecast that Brent Crude prices would remain around $65 per barrel later this year could be too optimistic as OPEC+ continues to raise production, which will result in a bigger-than-expected surplus after the summer ends.
Currently, the market is fairly balanced, and peak summer demand will support the large OPEC+ increases already announced for June and July. But the hikes after the third quarter – when peak demand season would have ended – will raise the surplus on the market to higher than previously expected levels, HSBC said.
Banks have divergent opinions about whether OPEC+ will proceed with easing the cuts, Goldman Sachs, for example, expects OPEC+ to make its final production hike in August at the now-standard level of 411,000 barrels daily.
Fuel card prices will rise in the region of 1 – 1.4 pence per litre for next week.
