Crude prices rose as much as 6 percent on Thursday after Saudi Arabia and its allies launched air strikes on Yemen, pushing shares lower in Europe, the Middle East and Asia and lifting oil producers’ currencies.
The military operations, including air strikes, targeted Iran-backed Houthi rebels besieging the southern Yemen city of Aden. Arab producers ship oil via the Gulf of Aden and Suez Canal to Europe.
The escalating tensions in the Middle East pushed the price of Brent crude up more than $3 a barrel to close to $60, a 2 1/2-week high. It last traded at $59.17, up 4.7 percent LCOc1.
“Oil is having a nice move after more geopolitical tensions in the Middle East over Yemen. Saudi has intervened via a military operation but, to be clear, (it) has at the moment led to no disruptions in oil supply,” said Atif Latif, director of trading at Guardian Stockbrokers in London.
A vertiginous slide in oil prices, from more than $115 a barrel last June to a low of $45 in January, has been a major driver of financial markets in the past year and a key factor driving monetary policy.
The fall has cut living costs for consumers across the globe but has triggered fears of growth-sapping deflation. More than two dozen central banks have eased policy, driving yields on many low-risk bonds into negative territory.
European shares followed Asian stocks lower. The pan-European FTSEurofirst 300 index .FTEU3 fell almost 1.5 percent. In Germany, a major industrial economy heavily dependent on oil imports, the DAX index .GDAXI fell 1.8 percent.
However, the STOXX Europe 600 oil and gas index .SXEP was up 0.8 percent.
Middle East stocks markets fell sharply. Dubai’s DFM index .DFMGI dropped more than 3 percent. The main Saudi index .TASI was down 0.55 percent.
Asian shares fell. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.8 percent, Australia’s main index .AXJO shed 1.4 percent, while Japan’s Nikkei .N225 lost 1.6 percent in its biggest daily decline since mid-January.
The dollar fell. It lost 0.8 percent against Japan’s yen, which stood at 118.51 to the dollar JPY=.
The euro was up 0.6 percent EUR= at $1.1029, having risen from a 12-year low of $1.0457 touched last week.
