The Brent crude oil price is on track for its biggest monthly gain on record in March after the Iran war caused mayhem in the markets.
Brent crude, the international benchmark, has climbed by 51% since the start of March, LSEG data shows, beating the previous monthly record of 46% in September 1990 after Saddam Hussein invaded Kuwait, leading to the first Gulf war.
Brent closed at $112.57 a barrel on Friday, up from $72.48 a barrel on 27 February, the day before the US-Israeli war on Iran began. Brent traded as high as $119.50 a barrel during March, its highest level since June 2022, after Iran all but closed the strait of Hormuz, through which a fifth of global oil and gas would normally pass.
US crude prices also rose during March; West Texas Intermediate has gained 48%, on track for its strongest month since May 2020, when the Covid-19 pandemic was disrupting the world economy.
Oil prices climbed through the month despite the coordinated release of 400m barrels of oil from emergency reserves announced on 11 March. Analysts at BloombergNEF estimate that 9m barrels of oil per day have been knocked off global oil supply by the Middle East conflict.
Donald Trump appeared to lose his ability to talk down the oil price as the war continued. Earlier in the month, the president’s claims of progress in negotiations pushed down crude prices, but by late March his declaration of a 10-day extension for Iran to reopen the strait of Hormuz was followed by a rising oil price and falling stock markets.
Oil was the best-performing asset during a volatile month for markets, in which shares, government bond prices and precious metals all fell.
Gold failed to live up to its reputation as a safe haven against inflation. The spot price of gold has fallen by almost 15% since the start of March, on track for its worst month since 2008, and the fifth-biggest monthly fall in the past 50 years.
Some investors may have been forced to sell gold to cover losses, or margin calls, on other positions in the market.
Gold was also under pressure from the sale of about $3bn of bullion by the Turkish Central Bank last week. It cut its reserves by almost 50 tonnes to 772 tonnes, to fund efforts to stabilise the Turkish lira.
Losses on Wall Street during March pulled the Dow Jones industrial average into a correction at the end of last week, more than 10% below its record high. Stocks fell despite Trump’s latest extension on planned strikes against Iran’s energy infrastructure, as investors anticipated prolonged disruption to oil from the Gulf.
“Markets appear to be placing less weight on White House jawboning and focusing more on the underlying supply risks,” said Fawad Razaqzada, a analyst at City Index.
Britain’s stock market had a poor month too, with the FTSE 100 index falling more than 8% – on track for its worst month since March 2020, when Covid-19 rocked financial markets. Almost all of its gains in January and February have been wiped out, with the FTSE 100 ending last week back below 10,000 points.
UK government bonds weakened through March too, as traders ripped up forecasts for the Bank of England to cut interest rates this year. As bond prices fell, the yield (or interest rate) on 10-year UK bonds rose by 17% to nearly 5%, which would be the biggest monthly percentage rise in borrowing costs since September 2022 when Liz Truss’s mini-budget sparked a bond sell-off.
Other European government bonds were also hit; Italian two-year debt was heading for its worst month since May 2018.
Modupe Adegbembo, an economist at Jefferies, said European governments were operating from a much weaker fiscal starting point than in 2022, the last energy price shock, meaning they had less scope for large‑scale fiscal intervention.
“As a result, more of the adjustment is likely to fall on demand,” which is negative for the growth outlook, Adegbembo added.
