Europe markets downbeat, crude prices subside following blasts in Iran

LONDON (ICIS)–Europe stock markets shifted onto bearish footing in morning trading on Friday in the wake of explosions in Iran that escalated fears of ever-higher tensions in the Middle East.

Oil prices settled after the initial shock. Explosions in Iran overnight sent crude pricing surging more than $3/barrel during the Asia trading window. Iran state media reported explosions near air bases close to the city of Isfahan, which also operates nuclear facilities.

Watchdog the International Atomic Energy Agency (IAEA) stated that there has been no damage to any nuclear facility, but urged caution.

“IAEA can confirm that there is no damage to Iran’s nuclear sites. Director General  Rafael Mariano Grossi continues to call for extreme restraint from everybody and reiterates that nuclear facilities should never be a target in military conflicts,” the agency said in a statement.

Reports have also emerged in the media of explosions in Iraq and Syria.

Speaking at a G7 briefing in Capri, Italy, this morning, US Secretary of State Anthony Blinken declined to comment on the developments beyond disavowing US involvement.

“I’m not going to speak to that, except to say that the US has not been involved in any offensive operations,” he said.

No parties have officially taken responsibility for the blasts, but the incident is the latest in a volatile week in the Middle East, which began in the wake of Iran’s drone strikes in Israel on 13 April, which the Israel Defence Force (IDF) confirmed had struck the Nevatim air base.

Crude oil pricing has whipsawed in the face of the market unrest, breaching the psychological $90/barrel mark before receding, before surging close to that watermark again when news of the blasts in Iran broke.

With no reprisals currently threatened, oil futures pricing quickly receded, dropping from $89.42/barrel for Brent at 3:17 BST to well under $87 in midday trading.

A build in crude stocks also weighed on sentiment, while diminishing expectations for imminent central bank rate cuts in the face of stubborn inflation has also slowed the pulse of the global economy.

Crude demand growth has been subdued this year but substantial downward shifts to supply could substantially tighten conditions, according to crude analysts at ING.

“If these reports [of explosions] 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,” the bank said in a note on Friday morning.

European public markets were also subdued, with Germany’s CAC 40 and the UK’s FTSE 100 indices trading down 0.65% and 0.45% respectively as of 13:30 GMT.

Europe chemicals stocks also weakened in early trading at a more modest level relative to general markets. The STOXX 600 chemicals index clumped 0.15% compared to Thursday’s close, with shares in seven of the 30 component companies down at least 1-2%. The weakest performer on Friday so far was Solvay, which saw shares shed 3.39% of their value as of 13:17 BST.

Thumbnail photo: The city of Isfahan, Iran. Source: Morteza Nikoubazl/NurPhoto/Shutterstock