Brent crude oil price is poised for its largest monthly gain on record in March, significantly influenced by the recent conflict involving Iran.
Brent has risen by 51% since the beginning of the month, surpassing the previous record of 46% set in September 1990, following the Gulf war. Brent closed at $112.57 a barrel last Friday, a sharp increase from $72.48 on 27 February: a day before the conflict started.
Bottleneck Risks Core Fundamental
Oil prices have increased despite a coordinated release of 400M barrels from emergency reserves announced on 11 March, with analysts estimating a daily reduction of 9M barrels in global supply due to the ongoing conflict.
Throughout a turbulent month, oil emerged as the best-performing asset, contrasting sharply with declines in equities and bonds.
Equities Fall Across Atlantic
Wall Street experienced considerable losses, with the Dow Jones Industrial Average entering correction territory last week, falling more than 10% from its peak. These stock declines persisted despite the President’s announcement of a continuation of planned strikes against Iranian energy infrastructure, as investors braced for sustained oil supply disruptions from the Gulf.
Analysts observe that investor sentiment is increasingly focused on supply risks rather than efforts from the White House to influence price movements.
The UK stock market also faced a challenging month, with the FTSE 100 index dropping over 8%, potentially marking its worst performance since March 2020 when the pandemic significantly impacted the financial landscape. Most gains recorded in January and February have been negated, culminating in the FTSE closing last week below the 10,000-point threshold.
UK government bonds weakened, as traders revised down expectations for Bank of England interest rate cuts this year. The yield on 10-year UK bonds surged by 17% to nearly 5%, reflecting the largest monthly percentage increase in borrowing costs since the fallout from Liz Truss’s mini-budget in September 2022.
Other European government bonds faced similar challenges, with Italian two-year debt also set for its most substantial monthly decline since May 2018.
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