Oil prices jumped on Monday after attacks on crude facilities in Saudi Arabia sliced the kingdom’s production in half and sparked worries over the impact of an oil shock on economic growth, halting a positive run in world stock markets as investors reached for less-risky assets.
Increased demand for safe-haven U.S. debt pushed Treasury yields lower and the price of gold rallied nearly 1 per cent.
The attack on Saudi Arabia shut down 5 per cent of global crude output. U.S. officials blamed Iran and President Donald Trump said Washington was “locked and loaded” to retaliate.
Oil prices surged nearly 20 per cent at one point on Monday, with Brent crude posting its biggest intraday gain since the 1990-1991 Gulf crisis, before paring gains.
Trump approved the use of U.S. emergency oil reserves to ensure stable supply, helping steady prices some.
“The attack on Saudi Arabian production facilities exposed their vulnerabilities, and as a result, the oil market is now pricing in additional geopolitical and security risk,” said Andy Lipow, president of Lipow Oil Associates in Houston.
U.S. crude rose 14.26 per cent to $62.67 per barrel and Brent was last at $68.71, up 14.1 per cent on the day.
Saudi Arabia officials were discussing delaying Aramco’s initial public offering, the Wall Street Journal reported on Monday, citing people familiar with the matter.
The upheaval in the oil market, coupled with poor economic data from China, served to sour investors’ appetite for risky assets.
The MSCI world equity index, which tracks shares in 47 countries, snapped a five-day winning streak to trade down 0.41 per cent.
Canada’s main stock index held at all-time highs on Monday as energy stocks were on track to post their best day in nearly three years after an attack on Saudi Arabian oil facilities sent oil prices soaring.
The Toronto Stock Exchange’s S&P/TSX composite index was up 68.89 points, or 0.41 per cent, at 16,751.31, pushing past Friday’s record high.
The energy sector jumped 9.3 per cent, its biggest one-day percentage gains since November 2016 as an attack on Saudi Arabia.
The most heavily traded shares by volume were oil producers and explorers Encana Corp., Crescent Point Energy Corp., and Baytex Energy Co.
The materials sector, which includes precious and base metals miners added 0.2 per cent after gold prices jumped as investors sought safety in the precious metal.
Lagging shares were Aurora Cannabis Inc., down 7.7 per cent, CannTrust Holdings Inc., down 7.0 per cent, and NovaGold Resources Inc., lower by 4.7 per cent.
Wall Street slipped as the jump in the price of oil presented yet another headwind for a global economy that is already buffeted by deteriorating manufacturing activity and elevated trade tensions, analysts said.
“The oil spike - higher prices globally - could slow world spending on items other than oil and that’s the main concern,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
Higher oil prices boosted beaten-down energy stocks, with S&P 500 energy, one of the worst performing sectors so far this year, rising 3.3 per cent.
Monday’s rapid spike in crude prices came at a time when central banks in the United States, Europe and Asia are easing monetary policy to fight a slowdown in the global economy amid a drawn-out trade war between Washington and Beijing.
The U.S. Federal Reserve is due to hold its next policy meeting on Wednesday, at which it is widely expected to ease interest rates and signal its future policy path.
The Dow Jones Industrial Average fell 143.24 points, or 0.53 per cent, to 27,076.28, the S&P 500 lost 9.38 points, or 0.31 per cent, to 2,998.01 and the Nasdaq Composite dropped 23.17 points, or 0.28 per cent, to 8,153.54.
The pan-European STOXX 600 index finished down 0.58 per cent.
U.S. Treasury yields slipped, with benchmark 10-year notes up 18/32 in price to yield 1.8432 per cent.
In FX markets, the dollar rose against a basket of currencies after Trump’s authorization of the use of an emergency crude stockpile helped temper the surge in oil prices.
The dollar index was up 0.39 per cent at 98.638.
Gold rose after the attack on oil facilities in Saudi Arabia inflamed worries over the stability of the Middle East, boosting demand for assets seen as a haven from risk. Spot gold was up 0.82 per cent at $1,500.7111 per ounce.