Europe midday: Shares down as Iran attacks Gulf shipping; Oil spikes

(Sharecast News) - European stocks were lower on Thursday on the back of inflationary fears as the oil price hit $100 a barrel in early trade as Iran continued to attack commercial shipping and energy infrastructure in the Gulf. The pan-regional Stoxx 600 index was down 0.13% to 601.72 at 1151 GMT, with most major bourses also lower. The UK FTSE fell 0.21%, France's CAC 40 0.25%, Italy's FTSE MIB 0.43% and Spain's Ibex 0.84%, meanwhile Germany's DAX bucked the trend with a 0.27% gain.

Oil prices remained in focus after the International Energy Agency on Wednesday agreed to release 400 million barrels of crude - its largest ever - as shipping through the vital Strait of Hormuz remained blocked.

In the latest developments, two tankers were set ablaze in Iraqi waters early Thursday after senior Iranian officials warned of a long "war of attrition" that would threaten chaos in the global economy. Oman's key oil export terminal has been evacuated and all terminal operations in the Salalah port suspended until further notice following an Iranian drone attack targeting the port late on Wednesday.

The attack resulted in damage to several fuel tanks at the port, according to a statement by the United Arab Emirates' Foreign Ministry.

No timeline was set out for when the reserve stocks would hit the market from the IEA's 32 member countries. Brent crude rose 5.76% to $97.28 a barrel having breached $101 at one point, while US benchmark West Texas Intermediate was up 5.16% to $91.75.

Gas prices trimmed earlier gains, with the European month-ahead benchmark up 2.1% higher at €51 per megawatt hour.

Iran has been targeting oil infrastructure in neighbouring states with military ties to the US and Israel. On Wednesday three cargo vessels were hit in the strait, through which 20% of global crude shipping leaves the Gulf into the Arabian Sea.

There has also been a reduction in output from major producers due to a combination on the threat of attack and storage facilities simply filling up as shipments dry up.

"The conflict has intensified this week, and the longer the oil price remains elevated, the more damaging and long-lasting the inflation shock will be for the global economy," said XTB research director Kathleen Brooks.

"When oil prices hit $100 per barrel, they tend to be sticky around this level. Back in 2022, WTI crude stayed above $100 for 87 days, thus the market needs to be prepared for elevated oil prices for the long haul."

The closure of the strait is also hitting supplies of fertilisers, which could drive up food prices, analysts warned.

"The longevity of such disruption is extremely important and would be relevant for the new crop prices. We update our price outlook on the back of stronger exports for soybeans, while wheat and corn prices could be more exposed to elevated fertiliser prices," said analysts at Citi.

In equity news, defence stocks were on the rise as the conflict showed signs of escalating. Leonardo jumped after results, while Thales, Saab, Hensoldt and Dassault all gained.

Swiss turbocharger maker Accelleron Industries surged as results beat expectations.

Reporting by Frank Prenesti for Sharecast.com