As US-Iran war resumes, volatility returns to SIA, Oiltek shares
[SINGAPORE] As peace talks fail in the Middle East and the Strait of Hormuz – through which 20 per cent of global oil would have normally flowed – effectively closes again, markets and economies are bracing for the fallout from a sustained spike in oil and gas prices.
Shares of Oiltek closed 6.3 per cent or S$0.09 higher at S$1.51 on Thursday (Jul 9), on the back of the resumption of the conflict in Iran and the increase in oil prices.
Singapore Airlines (SIA), which counts fuel as its largest cost component, tumbled 2 per cent or S$0.16 to S$7.68 and was the worst-performing STI constituent on Thursday.
In the oil market, West Texas Intermediate futures rose 1.1 per cent to US$74.31 per barrel at noon Singapore time, at around the highest since Jun 22.
Brent futures also rose 1.1 per cent, to US$78.89, near its peak on Jun 19.
By 6 pm however, West Texas Intermediate futures fell 0.1 per cent to US$73.48 per barrel, and Brent futures declined to US$78.
The aviation sector had suffered strong headwinds at the start of the war due to the spike in jet fuel prices, but shares of SIA had been recovering over the past two months on progress in efforts to end the US-Iran war.
“Yesterday, oil prices continued to push up higher although Brent failed to break the 80.00 resistance decisively, which at this point makes the prices still manageable for the world economy,” Maybank chief FX specialist Saktiandi Supaat said in a Thursday note.
On Wednesday, the US military said that it was launching fresh strikes on Iran, hours after US President Donald Trump declared that an interim agreement to end the war with Iran was “over”.
The latest round of attacks by the US was launched in response to Tuesday’s assault on three cargo ships that were transiting the Hormuz strait.
“Fundamentally, the events of the last few days significantly weaken any confidence that the current 60-day truce can still evolve into a permanent peace agreement,” said Jorge Leon, head of geopolitical analysis at consultancy Rystad Energy, in a Wednesday note.
Vessel movements through the Strait of Hormuz have already fallen sharply, Leon noted, from around 20 vessels on Jul 6 to just 11 the following day. Traffic on Wednesday appeared to have halted.
“Even if no sustained physical disruption materialises, uncertainty around vessel safety, insurance costs, potential delays and the risk of further retaliation is likely to keep volatility elevated in the near term,” he said.
