Middle East Tensions Shake Energy Markets: A Week in Review
The energy markets were certainly roiled last week as it was made clear to the world that Iran would respond promptly to the April 1 Israeli airstrike to the Iranian consulate annex building adjacent to the Iranian embassy in Syria. As predicted, and announced, there was a large scale assault against Israel that emanated from Iranian soil. While the response was large in scale, fortunately the Israeli military was well prepared and able to thwart the attack with their missile defense system. Both sides have since stepped back as the smoke literally cleared. Tehran said it would attack with greater force if there was further retaliation. Although Israel remains on high alert, the world is hopeful that the Iranian response was limited to a face saving action and that if neither side blinks, perhaps both sides will stand down for now. Having said all that, tensions remain high and volatility in the energy markets are certain to extend into the next few weeks. The US has decided not to move forward with replenishing its Strategic Petroleum Reserves because of the runup in oil prices. WTI prices closed the week at $85.66 a barrel while Brent crude ended Friday at $90.45
Wall Street was not immune from Middle East turmoil. Investments in equities declined and moved into the safer havens of bonds and gold. The skittishness was exacerbated by recent reports of a stronger labor market and the resurrection of inflation indicators. Now, no one is expecting a June rate cut. The S&P 500 fell 2% for the week, recording its worst weekly performance since late October 2023.
