\n<\/p>\n
Oil and gold prices have eased after Iranian authorities appeared to downplay reports of an attack from Israel.<\/b><\/p>\n
Brent crude, the international benchmark, <\/b>fell after jumping briefly <\/b>to over $90 a barrel after reports emerged of an attack.<\/p>\n
Gold briefly came close to a record high before settling below $2,400 an ounce.<\/p>\n
There are concerns a worsening conflict in the Middle East could disrupt oil supplies.<\/p>\n
Investors have been closely watching Israel\u2019s reaction to Iran’s direct drone and missile attack last weekend.<\/p>\n
Oil prices had jumped by as much as 3.5% initially. But Brent then fell back to roughly $87 a barrel after Iranian state media claimed that there was “no damage” in Isfahan province where there had been reports of explosions. <\/p>\n
Sharp and sustained rises in oil prices risk fuelling inflation. Countries are heavily reliant on the commodity, which is used to produce fuels such as petrol and diesel.<\/p>\n
Fuel and energy prices have been a major driver behind the higher cost of living worldwide in the past couple of years.<\/p>\n
Randeep Somel, fund manager at M&G Investment Management, told the BBC’s Today programme: “The concern for markets would mainly be the inflationary one, that this would actually add to inflation.”<\/p>\n
While the pace of inflation has been slowing, in the UK it is still above the Bank of England’s 2% target and some economists have forecast that a cut to interest rates may not happen until summer or later on in the year. <\/p>\n
“In the UK, the inflation rates is still around 3.2% – still someway off the target \u2013 and it is becoming a bit of a concern for policy makers,” said Mr Somel.<\/p>\n
“It is good to see that this hasn\u2019t escalated any further and that hopefully the disruption to markets is short-lived.\u201d<\/p>\n
The price of Brent is far below the heights reached after Russia invaded Ukraine in February 2022 when a number of major economies imposed sanctions on the oil-producing nation.<\/p>\n
Oil hit $125 a barrel in the weeks that followed, leading to a sustained period of higher household energy bills.<\/p>\n
The gold price often rises at times of uncertainty as it is seen as a safe investment.<\/p>\n
The heightened tension in the Middle East has led to concerns about whether shipping through the Strait of Hormuz between Oman and Iran will be affected.<\/p>\n
It is a crucial shipping route, as about 20% of the world’s total oil supply passes through it.<\/p>\n
Members of the oil producers’ cartel Opec – Saudi Arabia, Iran, the UAE, Kuwait and Iraq – send most of the oil they export through the strait.<\/p>\n
Iran is the seventh largest oil producer in the world, according to the US Energy Information Administration, and the third-largest member of Opec.<\/p>\n
The initial spike in oil prices was “a knee-jerk reaction to fears of a renewed escalation of warfare between Israel and Iran,” said energy market expert Vandana Hari of Vanda Insights.<\/p>\n
“What the latest events underscore is the heightened fragility and volatility in the Mid East situation,” she added.<\/p>\n
Stock markets were mixed as investors reacted to the latest events. <\/p>\n
In the US, the Dow Jones Industrial Average was roughly 0.5% higher in mid-day trade, while the S&P 500 fell 0.5% and the Nasdaq was down 1.3%.<\/p>\n
In the UK, the FTSE 100 share index closed 0.2% higher while the FTSE 250 ended down 0.3%.<\/p>\n
In Asia, Japan’s Nikkei 225 index fell 2.7%, while Hong Kong’s Hang Seng dropped 0.9%. <\/p>\n<\/div>\n