European oil producers saw their share prices climb on Monday following a weekend of renewed military exchanges between the U.S. and Iran, during which Tehran reported it had once again closed the Strait of Hormuz.
The spike in hostilities has cast doubt on an interim U.S.-Iran agreement that was reached last month and intended to reopen the critical shipping lane while pausing the conflict for a further 60 days of talks.
Markets responded quickly. By 04:25 ET (08:25 GMT), Brent crude futures had risen 2.9% to $78.24 a barrel, and U.S. West Texas Intermediate was up 2.7% at $73.34 a barrel. The uptick in oil prices supported a move higher in European energy equities.
The STOXX Europe 600 Oil & Gas index climbed 1.2%, making it one of the stronger sector performers within the broader STOXX 600. Several individual companies recorded gains: OMV rose around 1%, Repsol added roughly 2%, and TotalEnergies, Maurel & Prom, Eni and Equinor each advanced in a range between 1% and 2.1%. Shell and BP increased by about 1.1% and 2.3%, respectively.
The equity rally followed a weekend in which Iran struck U.S. facilities across the Gulf on Sunday, and the country’s Islamic Revolutionary Guard Corps said on Monday that it had targeted American military bases in Kuwait and Bahrain. Those actions coincided with a tangible impact on shipping through the Strait of Hormuz.
Shipping data showed transit through the strait fell to its lowest level in five weeks on Sunday, with just six vessels recorded making the crossing, according to ship-tracking firm Kpler. The strait had carried roughly one-fifth of the world’s daily oil and liquefied natural gas supply before the conflict escalated in late February.
Market context
- Renewed attacks between the U.S. and Iran over the weekend prompted a rise in global crude prices and supported gains in European oil equities.
- The interim agreement intended to reopen the Strait of Hormuz and pause hostilities for 60 days of talks is now in doubt following the latest exchanges.
- Shipping through the Strait of Hormuz dropped to its lowest level in five weeks, with only six vessels transiting on Sunday, per Kpler.
What to watch
- Movements in Brent and WTI prices, which jumped to $78.24 and $73.34 a barrel respectively in early trading, as an indicator of market reaction to further escalation.
- Performance of European energy names, with the STOXX Europe 600 Oil & Gas index notable for outperforming the broader STOXX 600 on the news.
- Updates on vessel traffic through the Strait of Hormuz, given its previous role in transporting about one-fifth of global oil and LNG supply.