ISLAMABAD: Global oil prices have surged to their highest levels since May, intensifying concerns over inflation, fuel costs and economic growth as escalating tensions in the Middle East threaten energy supplies and disrupt international shipping.
Thank you for reading this post, don't forget to subscribe!The rally has weighed on financial markets in Pakistan, India, the United States and the United Kingdom, while uncertainty surrounding liquefied natural gas (LNG) supplies has heightened risks for energy-importing economies.
Brent crude climbed to $115 per barrel, while US West Texas Intermediate (WTI) approached $101, according to the supplied market data. The increases reflect concerns over the security of oil shipments, potential disruptions to regional energy infrastructure and uncertainty surrounding diplomatic efforts to ease the conflict.
The International Energy Agency (IEA), in its October Oil Market Report, warned that renewed hostilities had threatened the recovery of Middle Eastern oil supplies. Although global oil supply increased in September, the recovery remained vulnerable to further disruptions. Higher freight charges and crude procurement costs have also squeezed refinery margins, while interruptions to fuel exports have tightened supplies of diesel and other refined products.
Natural gas markets have also recorded gains. The European TTF benchmark was quoted at 29.59, up 2.75 per cent, while the Japan-Korea Marker (JKM), a key Asian LNG benchmark, stood at 30.63, up 1.88 per cent, according to the supplied market data. The figures indicate upward pressure on gas markets, although their units and settlement periods are necessary for a complete assessment.
In the United States, stock futures declined on Friday as rising energy prices fuelled concerns over inflation, corporate costs and the outlook for interest rates. S&P 500 futures fell 0.3 per cent, Dow Jones futures dropped 0.6 per cent and Nasdaq futures slipped 0.1 per cent, according to an Associated Press report.
Britain’s equity market also came under pressure. The FTSE 100 fell 0.5 per cent to 10,699.33 points during trading on October 22, while the FTSE 250 declined 0.9 per cent, according to a Reuters report published through Investing.com. Banks were among the main contributors to the decline, while energy stocks benefited from higher oil prices.
Pakistan remains particularly exposed to international energy price fluctuations because of its reliance on imported petroleum products and LNG. Sustained increases in global prices could raise the country’s import bill, put pressure on foreign-exchange reserves and complicate efforts to stabilise the rupee.
The Pakistan Stock Exchange witnessed a sharp sell-off on Thursday, October 22, with the benchmark KSE-100 index losing 2,006.67 points, or 1.21 per cent, to close at 163,924.32. Market reports linked the decline partly to escalating geopolitical tensions and rising international oil prices, which heightened concerns about the country’s external account and economic outlook.
The government announced a mixed adjustment in domestic fuel prices effective October 23. Petrol was reduced by Rs1.60 to Rs377.71 per litre, while high-speed diesel increased by Rs1.64 to Rs391.75 per litre, according to local reporting. The adjustment highlights that domestic pump prices do not necessarily follow international crude prices directly, as taxes, levies, pricing mechanisms and other cost components also influence retail rates.
India is facing similar pressures because of its dependence on imported crude oil. Higher international prices can increase energy import costs, widen the trade deficit, weaken the rupee and fuel inflation if additional expenses are passed on to consumers and businesses.
Indian shares declined on Friday, October 23, amid rising crude prices and concerns over corporate earnings. The Nifty 50 fell 0.39 per cent to 22,600, while the Sensex dropped 0.17 per cent to 73,123.83. For the week, the indices declined by 2.4 per cent and 2.2 per cent, respectively.
Rising energy prices typically feed into inflation through both direct and indirect channels. Higher petrol, diesel, gas and electricity costs increase household expenses and transport charges, while manufacturers, farmers, retailers and logistics companies face higher operating costs that can translate into more expensive goods and services.
Food prices are also vulnerable because diesel powers agricultural machinery and transports crops, while energy is essential for irrigation, refrigeration, processing and distribution. Airlines and shipping companies may increase fares and freight charges, adding further pressure to travel costs and the prices of imported goods.
For energy-importing countries, the duration of the disruption will be critical. A prolonged period of elevated oil and LNG prices could intensify inflationary pressures, strain public finances, weaken currencies and constrain economic growth, while any improvement in regional security could help ease pressure on global energy markets.
Story by Khalid Mustafa
