Oil prices rose in early European trading on Wednesday following reports that Iran had attacked two vessels in the Strait of Hormuz, using new tactics to target shipping, according to Reuters. The reported incidents add to a series of disruptions in key maritime routes that have kept energy markets on edge.
The Strait of Hormuz, a narrow waterway between the Persian Gulf and the Gulf of Oman, is a critical chokepoint for global oil shipments. Any threat to its security tends to trigger immediate price reactions, and Wednesday was no exception. International benchmark Brent crude futures climbed around 1% to spike above $107 a barrel, while US West Texas Intermediate crude gained 0.5% to $94.64.
European gas prices near multi-year highs
Supply concerns also pushed European natural gas prices to levels not seen in four years. Benchmark Dutch TTF gas futures traded just above €86 per megawatt-hour on Wednesday morning, slightly below the previous peak of €87.44. The sustained pressure on gas prices reflects broader worries about energy security across the continent, particularly as winter approaches.
The escalation in the Middle East comes alongside continued tensions in the Red Sea, where Houthi attacks have disrupted shipping and prompted the EU to seek reinforcements for its naval mission. The EU's Red Sea mission has struggled to secure additional assets as attacks intensify, adding another layer of uncertainty for European energy supplies.
In a separate development, Saudi Arabia reported that an attack on an Aramco building in the kingdom's east caused a "limited fire" and that debris from intercepted Houthi missiles wounded four people in Riyadh. The Houthi-Saudi conflict, which has simmered for years, continues to pose a risk to crude supplies from the region.
European equities open higher
Despite the energy-related jitters, European stock markets opened on a positive note. The Euro Stoxx 50 rose 0.3%, while the broader pan-European Stoxx 600 traded 0.2% higher. France's CAC 40 and Spain's IBEX 35 led the gains, rising 0.5% and 0.6% respectively. The UK's FTSE 100, Germany's DAX, Italy's FTSE MIB, and the Netherlands' AEX all traded between 0.1% and 0.6% higher.
Asian shares were mixed, with interest in chipmakers and artificial intelligence continuing to support some stocks. Japan's Nikkei 225 gained 0.5%, as did Hong Kong's Hang Seng. The Shanghai Composite fell 0.3%, Australia's S&P/ASX 200 declined 0.6%, and South Korea's Kospi lost 1%.
Wall Street indices finished little changed near their records on Tuesday. The first big batch of third-quarter earnings reports from US companies beat analysts' expectations, but the resulting share price gains and losses largely cancelled each other out. The S&P 500 edged down by less than 0.1%, pulling slightly further from its all-time high set last week. The Dow Jones Industrial Average fell 0.3%, while the Nasdaq Composite dipped 0.2%.
Goldman Sachs jumped more than 4% at the start of trading after the bank reported a July-to-September profit that far exceeded analysts' expectations. But its stock quickly erased those gains, moving between gains and losses before finishing 0.2% lower.
Expectations are high for profits across US companies. Analysts are forecasting overall year-on-year earnings growth of nearly 30% for companies in the S&P 500 in the third quarter, according to FactSet. Companies need to meet those expectations to justify record share prices, despite concerns about high inflation, increased pressure from the bond market, and the conflicts in the Middle East.
Investors have also been concerned that chip stocks may have risen too far amid the enthusiasm for AI. China's memory chipmaker CXMT, which is making advances that could challenge industry heavyweights, rose about 1.0% in early Wednesday trading in Asia. In South Korea, Samsung Electronics shares also rose, but SK Hynix fell.
In the bond market, US Treasury yields eased on Tuesday after oil prices fell. The yield on the 10-year Treasury slipped to 5.21% from 5.24% late Friday. Trading in the US bond market was closed on Monday for a holiday. In currency trading, the US dollar traded at ¥158.30, while the euro was at $1.1209.
The reported attacks in the Strait of Hormuz come at a time when European energy markets are already under strain. The French government's decision to tap strategic diesel reserves to cut pump prices by €10 per tank highlights the broader pressure on fuel costs across the continent. Meanwhile, the EU's efforts to diversify energy sources and reduce dependence on volatile regions remain a work in progress.
As the situation in the Middle East evolves, European policymakers and businesses will be watching closely. The combination of geopolitical tensions, supply disruptions, and high energy prices poses a significant challenge to the region's economic recovery. With winter approaching, the stakes are particularly high for households and industries that rely on affordable gas and electricity.
