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European stocks edged lower at the start of trading on Thursday as oil prices briefly surged above $100 per barrel, driven by ongoing disruptions to shipping routes linked to the conflict involving Iran.
By 04:04 ET (08:04 GMT), the pan-European Stoxx 600 index fell 0.4%, while Germany’s DAX declined 0.2%, France’s CAC 40 dropped 0.5%, and the FTSE 100 in the United Kingdom slipped 0.5%.
Oil volatility weighs on markets
Oil prices have been highly volatile as the conflict in the Middle East continues to disrupt key energy supply routes.
Crude futures surged again on Thursday, extending recent swings in prices despite efforts by the International Energy Agency (IEA) to stabilize markets through what could become the largest-ever release of strategic oil reserves.
The United States has also indicated it will release oil from its own strategic reserves, though analysts warn that such measures may only provide temporary relief.
Strait of Hormuz disruption drives supply fears
Energy markets remain focused on the Strait of Hormuz, the narrow waterway south of Iran through which roughly 20% of the world’s oil supply normally passes.
Shipping through the strait has nearly come to a halt after Iran threatened to attack vessels attempting to cross the route. Reports have also suggested that naval mines may have been deployed in the area, raising the risk for commercial shipping.
The U.S. Navy has so far not committed to escorting tankers through the passage due to safety concerns, further limiting oil flows.
As a result, traffic through the strait has slowed dramatically, tightening global supply and pushing crude prices higher.
Inflation fears grow
The disruption to energy shipments has raised concerns about a potential surge in global inflation.
Regions such as Europe and Asia, which rely heavily on imported oil and gas passing through the Strait of Hormuz, are particularly vulnerable to supply disruptions stemming from the conflict involving the United States, Israel, and Iran.
At 04:05 ET, Brent crude futures rose 4.3% to $95.92 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 3.8% to $90.54 per barrel.
With shipping routes under threat and geopolitical tensions continuing to escalate, investors remain cautious as they assess the potential economic fallout from prolonged energy market disruptions.
