Global share markets were hammered yesterday after crude futures soared by more than $5, leaping to record levels above $147 a barrel on concerns that Israel may be preparing to attack Iran's nuclear sites.
Global share markets were hammered yesterday after crude futures soared by more than $5, leaping to record levels above $147 a barrel on concerns that Israel may be preparing to attack Iran's nuclear sites.
Crude was also pushed higher by a strike by offshore petroleum workers in Brazil and renewed militant activity in Nigeria that threatened to cut supplies to oil-hungry markets.
The London Stock Exchange closed in bear market territory with the FTSE-100 blue-chip index down 145.2 points at 5261.6 - its lowest closing level in nearly three years. A bear market exists when a leading index falls 20% from its 12-month peak. The Footsie posted a weekly loss of 2%, marking an eighth straight week in retreat.
"We haven't reached the bottom and the bears are still fully in control," said Angus Campbell, head of sales at Capital Spreads.
Exchanges on mainland Europe also suffered, with cheaper bank stocks offsetting gains by oil and gas companies.
US stocks were down sharply for much of the session. The Dow Jones industrial average slumped below 11,000 for the first time since July 2006, as investors fretted about oil prices and the stability of home financing providers Freddie Mac and Fannie Mae. The Dow later ended 128.48 points weaker at 11,100.54.
Black gold rallied to a new peak of $147.27 a barrel in frenzied dealing on the New York Mercantile Exchange after the respected Jerusalem Post said Israeli war planes practised bombing runs over Iraq, adding to speculation the country is preparing to attack Iran.
Meanwhile, a Brazilian trade union said it plans a five-day strike on platforms that pump 80% of the country's crude and Nigerian militants pledged to renew attacks on oil facilities.
"We are now in uncharted territory here with the Iranian situation," said Tom James, head of commodities trading at Liquid Capital Markets. "People are just too scared to sell."
US light sweet crude later fell back to trade $3.43 higher at $145.08. In London, North Sea Brent surged to around $147 a barrel on the ICE Futures Exchange before easing to $144.49 a barrel, up $2.46 on the day.
ICE gas oil futures climbed to a new record peak of $1336.75 a tonne amid strong demand for diesel and aviation fuel.
Some traders said $150-a-barrel crude now seemed only days away. Graham French, a senior fund manager at M&G in London, said the price of oil will reach "unthinkable levels" on the back of demand from emerging markets such as China and India.
The Jerusalem Post said Israeli war planes are conducting manoeuvres in Iraqi airspace and using US bases in the country, possibly practising for a strike against Iran, the newspaper reported, citing comments by Iraqi officials in local media. However, Israeli government spokesman Mark Regev denied the report.
Iran, the second-biggest producer in the Opec producers' cartel, this week tested missiles capable of reaching Israel and British and US military bases in Iraq and the Persian Gulf.
The Islamic republic has threatened to strike back at Tel Aviv as well as US interests in a key oil shipping route if it is attacked over its uranium enrichment programme, which Israel and the West fears is aimed at making nuclear weapons. US Secretary of State Condoleezza Rice told the Iranian government that the United States will defend its allies, and Iran responded with another missile launch.
Opec - the Organisation of the Petroleum Exporting Countries - warned on Thursday that it cannot replace the shortfall if Iran is attacked and takes its crude supplies off the market.
Trouble also loomed in Nigeria, where possible attacks on oil facilities could again disrupt supplies in the oil-rich region. Nigeria's main militant group vowed on Thursday to resume a protracted conflict because of Britain's recent pledge to back the government there. Unrest during the past two years has already cut the country's normal daily oil output by a quarter.
In Brazil, about 4500 employees of state-controlled Petroleo Brasileiro SA - better known as Petrobras - will protest on platforms in the offshore Campos basin over pay, a union official stated.
Analysts said they expected oil prices to rise again next week because of threats to supply from Iran and Nigeria and falling stockpiles in the United States, the biggest energy-consuming country.
