Asia petrochemical shares tumble on Mideast concerns; oil pares gains

SINGAPORE (ICIS)–Shares of petrochemical companies in Asia slumped on Friday, while oil prices surged amid escalating tensions in the Middle East following reported explosions in Iran, Syria and Iraq.

• Japan’s Nikkei 225 falls 2.66% at close of trade
• Brent crude briefly crosses $90/bbl; oil eases off highs
• Israel behind Iran explosions – reports

At 07:24 GMT, Asahi Kasei Corp and Mitsui Chemicals were down by 1.31% and 1.98%, respectively, in Tokyo, as Japan’s benchmark Nikkei 225 shed 2.66% to close at 37,068.35.

In Seoul, LG Chem fell 2.11% as South Korea’s KOSPI composite fell by 1.63% to 2,591.86.

Hong Kong’s Hang Seng Index slipped by 0.98% to 16,226.07.

In southeast Asia, PETRONAS Chemicals Group (PCG) slipped by 0.44% while Siam Cement Group (SCG) was down 2.69%.

High oil prices will continue to squeeze margins of petrochemical producers, which are struggling with poor demand and overcapacity.

Middle East markets in Saudi Arabia, Kuwait, Bahrain, and Qatar could mirror the movement in Asia when they open on 21 April. Regional bourses are closed on Fridays and Saturdays.

Oil prices pared earlier gains in the afternoon trade in Asia after surging by more than $3/barrel earlier in the session, following reports by various media outlets in the Middle East of explosions in Iran, Syria, and Iraq.

“If these reports turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions,” said Dutch banking and financial information services provider ING in a note on Friday.

Overnight, oil prices settled mixed following a sell-off early in the week as financial markets discounted fears of a war between Israel and Iran that could disrupt crude supplies.

Explosions were heard around the central city of Isfahan early on Friday, Iranian media reported, adding that three drones were destroyed after the country’s air defense systems were activated.

Isfahan houses a significant military airbase, and the province is host to numerous Iranian nuclear facilities, among them the city of Natanz, which is central to Iran’s uranium enrichment efforts.

Iran’s state-run Press TV in a report said that “important facilities in the Isfahan province, especially nuclear facilities, are completely safe and no accidents have been reported”.

Iran initially closed its airports in Tehran, Shiraz and Isfahan after the attack but has since re-opened them.

“Normal operations have resumed for flights at Iranian airports including Imam Khomeini International Airport and Mehrabad International Airport in Tehran after temporary delays,” Press TV said, citing the Iran Airports and Air Navigation Co.

Elsewhere, Iran’s official IRNA news agency said a series of explosions in Syria targeted military sites.

In Iraq, meanwhile, explosions were reported in the al-Imam area of Babel.

The reports have sparked worry that Israel has retaliated against Iran’s drone attacks last week.

Iran launched the strikes on 13 April in response to a suspected Israeli airstrike on Iran’s consulate in Syria at the start of the month.

Prior to the news of Friday’s attacks, Iran’s Foreign Minister Hossein Amir-Abdollahian issued a warning during an interview with US broadcaster CNN on Thursday that Iran would respond “immediately and with maximum intensity” to any Israeli aggression.

Focus article by Nurluqman Suratman

Additional reporting by Nadim Salamoun