Middle East crisis pushes up oil prices – and could drive inflation rises too

Analysis Middle East crisis pushes up oil prices – and could drive inflation rises too Heather Stewart Economics editor Effects of extended conflict between US and Iran could also lead to higher interest rates and hit economic growth Business live – latest updates US-Israel war on Iran – live updates The impact of the deadly and unpredictable conflict in the Middle East on the global economy will be felt most immediately, and keenly, through the rising cost of oil. Prices jumped on Monday, as markets had their first opportunity to digest the weekend’s tit-for-tat attacks. A barrel of Brent crude oil was trading at about $79 (£59) by lunchtime in London, up about $6 or 8.5% on the day. The price had already risen significantly this year, from just above $60 in January, as tensions between the US and Iran intensified. Natural gas prices have shot up too, with the waterway also a vital artery for liquid national gas supplies. Benchmark European gas prices were up 38% on Monday, exacerbated after QatarEnergy said it was halting production at sites after drone attacks. As the economic impact of Russia’s invasion of Ukraine underlined, rising energy costs feed through rapidly to consumers’ pockets – and have wider knock-on effects for the cost of just about everything else. Net energy importers in Asia and Europe, including the UK, will be hit harder by higher prices. The US, with its shale oil supplies and strategic petroleum reserve, should be more able to insulate itself – though a prolonged spell of higher costs could deter the Federal Reserve from delivering the interest rate cuts Donald Trump dearly wants . How high energy prices may go will depend on the scale of disruption to traffic through the crucial supply route of the strait of Hormuz , as well as the risk of direct attacks on energy infrastructure in the wider region. State-owned QatarEnergy announced that it was halting production at two sites on Monday, after attacks on facilities nearby. Tankers are alrea...