Oil extends gains and stocks dive as Middle East war spreads

HONG KONG: Oil prices extended gains while the dollar and equities tumbled Tuesday as investors kept tabs on the widening war in the Middle East.

The US and Israeli attacks on the Islamic republic have upended regional energy flows, with the crucial Strait of Hormuz — through which about a fifth of global oil transits — effectively closed off. The war has also fuelled fears of a fresh energy crisis that could ramp up inflation.

Market moves have been comparatively mild amid hopes that the crisis will be short-lived and not cause a major problem for the global economy.

But analysts warned that the longer it goes on the more painful it would be as supply chains are hit and prices surge.

US President Donald Trump said the war, which began Saturday with a strike that killed Iran’s supreme leader Ayatollah Ali Khamenei, was going “substantially” ahead of schedule but warned it could go on for more than four weeks.

He also for the first time laid out objectives — destroying Iran’s missiles, navy and nuclear programme, and stopping its support for armed groups across the region — which notably did not include toppling the Islamic republic.