Oil prices hit five-month high as Middle East conflict fears intensify

December Brent futures reached $114.64 a barrel after jumping four per cent on Thursday. US West Texas Intermediate crude also rose above $100.

The rally followed further attacks by Yemen’s Iran-aligned Houthis on Saudi energy infrastructure.

Saudi Aramco ordered staff to evacuate its headquarters in Dhahran as the clashes escalated, according to Reuters.

Analysts at energy advisory firm Ritterbusch and Associates said: “The complex is rebounding on another strong injection of risk premium related to an additional Houthi attack on Saudi infrastructure amid talk of a combined US/Israeli strike on Iran after the mid-terms.”

A New York Times report also suggested that Washington and Israel had drawn up plans for renewed military action against Iran after the US midterm elections.

This added to fears that the conflict could escalate and disrupt global energy supplies.

Despite the rise in oil prices, London’s main stock markets opened largely unchanged on Friday.

The FTSE 100 stood at 10,727.92, while the more domestically focused FTSE 250 opened at 24,220.53.

Energy companies benefited from the increase in crude prices. Shell shares rose by 0.8 per cent, while BP gained 1.6 per cent.

These gains helped offset losses caused by the global sell-off in technology stocks.

Oil prices have now increased by more than four per cent this week. The rise is adding pressure to companies facing higher fuel, manufacturing and transport costs.

Shipping costs have also risen sharply. By mid-October, the cost of transporting crude from the Middle East Gulf to Asia on a large tanker had climbed above $37 per barrel, according to MarketWatch.

This was more than five times the level recorded before the war.

European gas prices also increased. November futures for the Dutch TTF benchmark traded above 90 per megawatt-hour on Thursday.

High energy prices could add to inflation and increase the likelihood that central banks keep interest rates higher for longer.

At the same time, a technology-led sell-off hit Wall Street on Thursday. The Nasdaq fell by 2.6 per cent, while the S&P 500 suffered its worst session since July.

Nvidia, the world’s most valuable listed company, dropped by 4.4 per cent and was the biggest drag on the S&P 500.

The chipmaker’s chief executive, Jensen Huang, unsettled investors by warning that a “scarcity of capital” was slowing the rollout of artificial intelligence.

Other major technology companies also suffered losses. Meta Platforms fell by almost seven per cent after its quarterly profit disappointed investors, despite the company reporting stronger-than-expected revenue.

Tesla dropped by 3.1 per cent following weaker-than-forecast revenue. CoreWeave, which has borrowed heavily to rent access to Nvidia’s chips, tumbled by 10.1 per cent.

The sell-off then spread to markets across Asia. Japan’s Nikkei 225 fell by as much as 2.3 per cent and was down more than four per cent over the week.

South Korea’s Kospi dropped by as much as 4.1 per cent before recovering to close slightly higher.

The market turmoil prompted investors to move money into assets traditionally considered safer.

The yield on 10-year US Treasury bonds fell by 16 basis points, or 0.16 percentage points, from 5.13 per cent to 4.97 per cent. This was its largest one-day fall since March 2023.

Concerns about government debt continued to affect European bond markets. France’s 10-year bond yield stood at around 5.07 per cent late on Thursday, 173 basis points above the equivalent German yield.

Markets face further tests next week. Microsoft, Amazon and Alphabet are due to report their latest earnings, while the Federal Reserve will announce its interest rate decision on Wednesday.

For UK investors, rising energy prices and tighter financial conditions create a difficult outlook. Higher oil prices could push inflation up further, reducing the chances of borrowing costs falling soon.