Brent crude oil is poised for its most significant monthly increase ever, soaring 51% since the beginning of March as turmoil engendered by the Iran conflict wreaked havoc in markets. According to LSEG data, March’s hike surpasses the previous record of 46% set in September 1990, during the first Gulf War sparked by Saddam Hussein’s invasion of Kuwait. As of Friday, Brent closed at $112.57 a barrel, a substantial jump from $72.48 a barrel on February 27, the day preceding the onset of the US-Israeli war on Iran. At its peak during the month, Brent reached $119.50 a barrel, marking its highest price since June 2022, following Iran’s near-total closure of the Strait of Hormuz, a crucial maritime route through which about 20% of global oil and gas would typically transit.
West Texas Intermediate (WTI) crude oil prices mirrored Brent’s trajectory, rising 48% in March. This performance is on track to mark WTI’s strongest month since May 2020, during the early disruptions caused by the COVID-19 pandemic. Despite a coordinated effort to release 400 million barrels from emergency reserves announced on March 11, oil prices continued to ascend. Analysts at BloombergNEF suggest that the conflict in the Middle East has curtailed global oil supply by approximately 9 million barrels per day.
Former President Donald Trump’s influence over oil prices appeared to diminish as the conflict persisted. Initially, his suggestions of progress in negotiations helped to lower crude prices, but a late March declaration extending Iran’s deadline to reopen the Strait of Hormuz resulted in rising oil prices alongside declining stock markets.
Throughout the month, oil was a standout asset, contrasting sharply with other markets where stocks, government bonds, and precious metals saw declines. Notably, gold—a traditional safe haven—plummeted nearly 15% since the start of the month, marking its worst performance since 2008 and ranking as the fifth-largest monthly drop in half a century. Speculation suggests that some investors may have sold gold to cover losses or respond to margin calls on other investments. Additionally, the Turkish Central Bank sold around $3 billion in bullion last week, reducing its reserves by nearly 50 tonnes to stabilize the Turkish lira.
Wall Street faced significant challenges in March, with the Dow Jones Industrial Average sliding into correction territory by the end of the week, over 10% below its record high. The stock declines continued even after Trump’s latest extension on planned strikes against Iran’s energy infrastructure, as investors braced themselves for ongoing disruptions to oil supply from the Gulf region. Fawad Razaqzada, an analyst at City Index, noted that market sentiment appeared to shift away from relying on White House assurances and instead focused on the underlying risks to supply.
Similarly, the UK stock market struggled in March, with the FTSE 100 index dropping over 8%, positioning it for its worst month since March 2020, when the onset of COVID-19 unsettled financial markets. The index reverted below the key 10,000-point mark, erasing most of its gains from the earlier part of the year.
UK government bonds faced a downturn as traders revised expectations for potential interest rate cuts by the Bank of England this year. The yield on 10-year UK bonds surged by 17% to nearly 5%, indicative of the largest monthly percentage increase in borrowing costs since September 2022, when the financial markets reacted to Liz Truss’s controversial mini-budget. Similarly, Italian two-year debt is headed for a troubling month as well.
Economic expert Modupe Adegbembo from Jefferies pointed out that European governments are operating under considerably weaker fiscal conditions than they did during the last energy price shock in 2022, reducing their capacity for large-scale fiscal interventions. “As a result, more of the adjustment is likely to fall on demand,” which he indicated could negatively impact the overall growth outlook.
