Benchmark European diesel refining margins rose nearly 25% on Monday, to their widest since November 20, as the U.S.-Iran conflict disrupted supplies in the Middle East, Reuters reports.
Margins traded at $30.75 a barrel this morning, up by nearly $6, after hitting a session high of $33.76 earlier.
Analysts at ABN Amro predict that the rise in the oil price will have a bigger impact on inflation rather than growth.
They have drawn up three inflation scenarios, covering Brent crude at $80/barrel (roughly its current level), $100 and $130 per barrel.
In the latter scenario, US inflation approaches 4% this year – double the Federal Reserve’s target.
ABN Amro say:
Already facing above target inflation, higher oil prices put the Fed in an even more difficult situation. Headline inflation will rise substantially, while core inflation, which excludes energy prices, barely moves. The usual policy response, which remainsthe most likely for now, is therefore to look through the oil price shock, seeing as it’s a one-off inflationary impulse.
In the current setting, things are more complicated, because the scenario of oversupply with falling energy prices provided a tailwind in headline inflation, which could be used to argue in favour of rate cuts. Higher energy prices, and a resurgence of inflation,could very well tilt the already fragile balance in the FOMC towards holding rates, on the fear of inflation expectations becoming de-anchored, even if the shock is temporary. For our base case to alter, we would need to see, or expect, sustained higher oil prices. Signs of inflation de-anchoring would put a nail in the coffin for rate cuts this year.
Turning to the eurozone, in the mildest scenario(Brent $80), inflation goes from being well below the ECB’s 2%target to moving broadlyback to target and staying there. Even in the mostsevere (Brent $130) scenario, while eurozone inflation is boosted by1.3pp in 2026, the lasting impact is relatively mild, with 2027 inflation only 0.2pphigher.
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UK manufacturing kept growing in February
British manufacturers enjoyed another strong month in February, according to a closely-watched survey, with firms reporting a rise in new business both at home and abroad.
The S&P’s purchasing managers’ index, which measures activity in the private manufacturing sector, came in at 51.7 in February, which was a very slight fall from 51.8 in January, but still one of the best readings since August 2024. Any reading above 50 represents growth.
The monthly survey of about 650 manufacturers showed new export orders rising at the quickest pace in four-and-a-half years in February, while optimism about the year ahead stayed close to January’s recent high, with close to three-fifths of all companies expecting to expand production during the coming year. Factories reported receiving a higher volume of orders from mainland China, the EU, Middle East and the US.
However, several firms remained cautious, citing uncertainty regarding future government policy and “ongoing geopolitical and global trade tensions.” The survey was conducted before the US-Israel war with Iran began and concerns about exports and cost inflation are only likely to increase next month.
Job losses were also registered for the sixteenth successive month, although at the smallest level during that sequence, and input costs rose to a six-month high, which manufacturers passed on to customers in the form of higher prices, with average output charges increasing for the third month in a row.
Professor Costas Milas, of the management school at the University of Liverpool, says the rise in oil price means the Bank of England will probably maintain interest rates at their current levels for longer, rather than cutting.
Here’s why:
Rachel Reeves and the BoE are (still) hoping for inflation to revert back to the target before May. The latest geopolitical developments might challenge this. From the plot below, CPI inflation correlates positively with global supply pressures.
Global supply pressures precede CPI inflation which, unfortunately, is already happening! Both global supply pressures and an (imminent) increase in the price of oil are exogenous factors with strong predicting power for UK inflation.
Since the BoE can do nothing about these exogenous sources of inflation, it looks more likely than not that (as things stand) Bank Rate will remain at 3.75% for longer.
Reuters are reporting that cruise operator MSC is keeping its Euribia ship in the port of Dubai, due to the Iran conflict.
MSC CRUISES: FOLLOWING GUIDANCE OF REGIONAL U.S. MILITARY AUTHORITIES TO KEEP MSC EURIBIA SHIP IN PORT OF DUBAI
— CGTN Europe (@CGTNEurope) March 2, 2026
MSC add that they are actively in contact with embassies and foreign offices to ensure they have relevant information about their nationals on board and to understand any repatriation plans being developed.
UK mortgage approvals hit two-year low
Away from the Middle East, the UK’s housing market slowed at the start of 2026, new data shows.
The Bank of England has reported that 59,999 new mortgages were approved in January, the lowest since January 2024.
That slowdown came despite a drop in the ‘effective’ interest rate on new mortgages, which fell to 4.09% in January from 4.15% in December.
Net borrowing of mortgage debt by individuals decreased to £4.1bn in January, down from £4.5bn in December, and below the previous 6-month average of £4.5bn.
Gold, a traditional safe haven in times of turmoil, has hit a one-month high today.
Gold is up 2.2% at $5.392 an ounce, having hit its highest level since 30 January this morning.
Susannah Streeter, chief investment strategist at Wealth Club, says:
Precious metals prices have ratcheted up again, with gold and silver increasingly sought after in these turbulent times. Gold has reached a one-month high, after recording its seventh consecutive monthly gain in February - the best winning streak since 1973. Back then, a severe oil shock led to a flight to safe havens. While oil prices have increased sharply, this is not yet mirroring the 1970s surge, when prices effectively quadrupled in just a few months after Gulf countries retaliated against US support for Israel in the Yom Kippur War.
However, with tensions escalating and uncertainty so high, it is far from clear how this current conflict will evolve, and prices could climb even higher. This time around, other worries are also colliding to push up precious metals prices, including high debt levels, concerns over the Federal Reserve’s independence, and questions about the sustainability of the artificial intelligence boom.
Travel company shares across Europe are falling sharply, as the US-Israel war with Iran disrupts flights and deters people from travelling to the region.
Shares in TUI, Europe’s largest travel company, dropped 7% in early trade, while British Airways-owner IAG are now down 5.5%, having initially lost 9%.
Lufthansa and Air France-KLM both fell 7%, while in London cruise operator Carnival is down 7.1%.
Wall Street is on track for losses when trading begins in New York in under six hours.
Victoria Scholar, head of investment at interactive investor, says:
“US futures are pointing to notable declines at the open on Wall Street with Nasdaq futures down around 2% and S&P and Dow futures down around 1.5% each.”
Europe’s bank stocks are down 3.9% so far this morning, on track for the biggest one-day drop since Donald Trump announced sweeping tariffs in April 2025.
Generali Investments: A fast escalating Gulf crisis may lead oil to above $100 a barrel
Paolo Zanghieri of Generali Investments also fears that “a fast escalating Gulf crisis” may push oil above $100 a barrel.
Currently, Brent crude is up 9.5% today at $79.85 a barrel.
Zanghieri says reopening the strait of Hormuz to traffic is the key to preventing prices spiking higher:
“The coordinated attacks by Israel and US on Iran are explicitly aimed at regime change and will likely last much longer than the limited action seen in 2025, when Brent briefly exceeded 80US$/barrel.
Iran has retaliated by targeting Israel, US bases in Gulf states, and closing the Strait of Hormuz, while Houthi rebels pledged renewed attacks in the Red Sea. This escalation is meant to pressure Gulf states to seek de-escalation. Iran’s Kharg Island oil terminal was attacked, but Gulf states’ infrastructure remains untouched.
Closing Hormuz could cut around 15–20% of global oil output. OPEC+ decided to boost supply by 206,000 b/day, and spare capacity (just under 3 million b/day) could theoretically offset lost Iranian exports (1.6 million), while OECDE reserves are well within the normal range. Yet, preventing oil prices from breaching US$100/b depends on reopening Hormuz.
The Iranian navy is likely too weak for a full blockade, but partial disruption obtained through sporadic attacks to ships and mining the Strait could push prices to US$90 or above. Direct strikes on Gulf oil facilities would sharply raise prices but also compromise Iran’s already weak regional ties and upset China.”
UK gilt yields rise as Middle East conflict rages
UK government borrowing costs are rising today, as investors trimmed their expectations for Bank of England interest rate cuts.
The yields, or interest rates, on short- and longer-dated gilts have risen by between 3 and 4 basis points in early trade.
India and Canada agree deals over uranium and critical minerals
Over in New Delhi, India and Canada have agreed deals covering critical minerals and uranium supply.
The pacts, which also covered technology and promoting the use of renewable energy, were announced after talks between India’s prime minister Narendra Modi and Canada’s Mark Carney.
Both leaders hailed a fresh start in the relationship between their nations.
Modi said:
“Our ties have seen a new energy, mutual trust, and positivity.”
Carney was also upbeat, saying:
“This is not merely the renewal of a relationship. It is the expansion of a valued partnership with new ambition, focus, and foresight, a partnership between two confident countries charting our own course for the future.”
The surge in the oil price may make it harder for central banks to cut interest rates as quickly as hoped.
The odds of a Bank of England rate cut in March have dropped to 68% this morning, down from 80% last week; higher energy prices will make it harder for the BoE to bring inflation down to target.
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European stock markets drop
Stock markets across Europe are sliding at the start of trading.
The main indices are firmly in the red:
Germany’s DAX: down 2.2%
France’s CAC 40: down 2.3%
Italy’s FTSE MIB: down 2.3%
Spain’s IBEX: down 2.4%
Emma Wall, chief investment strategist, Hargreaves Lansdown, says there is a flight to safety that is helping gold and US dollar to rally:
“Events in the Middle East over the weekend – the US-Israel strikes on Iran, and subsequent retaliations across the region – have added uncertainty, and volatility, to an already choppy market. Global equities, buffeted by AI disruption fears and ever-changing tariff policy over recent months, are now digesting the likelihood of significantly higher oil prices, supply chain concerns, and the potential for subsequent higher inflation.
Investors have reacted by turning ‘risk-off’, buying in to the perceived safe havens of gold, the US dollar and the Swiss franc. Initial equity market reaction was mixed. Middle Eastern markets trading yesterday fell – but only by 2-4% as key oil producers listed in the region provided a counter to wider losses.
Investors globally are broadly selling equities to fund the risk-off pivot, but the energy sector looks set to gain. US treasury bonds and UK gilts are also expected to benefit.
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BAE Systems shares jump
Shares in weapons producer BAE Systems have jumped 7% at the start of trading in London, as investors pile into defence stocks.
Rivals across Europe are rallying too, including Swedish aerospace and defense company Saab (+5.9%) and Italy’s Leonardo (+4.8%).
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IAG, the parent company of British Airways, are down 9.5% at the start of trading – the biggest faller on the FTSE 100.
FTSE 100 drops 1% at start of trading
London’s stock market has just opened, and investors are reacting to the US-Israel war on Iran by selling shares in travel companies and banks, and piling into oil producers
The FTSE 100 share index has dropped by 1% in early trading, down 111 points to 10,798 points.
Budget airline easyJet (-6.2%) and Intercontinental Hotels (-5.8%) are among the fallers, as traders anticipate loss of business in the Middle East, as thousands of flights are cancelled.
Informa, the conference organiser, are down 6.2% – they hold many events in the Middle East, including Gulf Print & Pack which should begin at the end of March.
But the surge in the crude price today is pushing Shell (+5.7%) and BP (+6.3%) to the top of the FTSE 100 risers.
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Pound stumbles as dollar soars
The US dollar is strengthening this morning as investors seek out the safety of the US dollar.
The dollar, which traditionally does well in times of crisis, has strengthened by 0.8% this morning.
The pound is down 1%, or 1.3 cents, at $1.3346.
But in the long run, the Iran attacks could spur the slow decline of the dollar’s global dominance…
European gas prices surge
European natural gas prices have surged today, as the US-Israel war on Iran sparks fears of a major disruption to global energy supplies.
Benchmark futures climbed as much as 25% — the biggest increase since August 2023 — Bloomberg report, after tanker traffic through the strait of Hormuz was largely halted over the weekend.
Dutch front-month futures, Europe’s gas benchmark, were 20% higher at €38.44 a megawatt-hour in early trading in Amsterdam.
Analyst: Oil prices could hit $100/bbl as strait of Hormuz traffic halts
Analysts are warning that the US-Israel war with Iran could drive oil prices up to $100 a barrel.
Consultancy firm Wood Mackenzie is warning that higher oil and gas prices are certain, and that oil prices could potentially exceeding $100/barrel if tanker flows through the strait of Hormuz are not quickly restored.
They say tanker traffic has been effectively halted, after Iran warned shipping away from the waterway and insurers withdrew coverage.
In the current scenario, oil prices over US$100/bbl are possible if transit flows are not re-established quickly, according to Alan Gelder, SVP of Refining, Chemicals and Oil Markets at Wood Mackenzie.
Gelder explains:
“The key question is when do vessels re-establish export flows.
“No doubt, tanker rates and insurance will increase dramatically, but these costs would only be a small part of the oil price impact associated with a curtailment of oil flows if they last for more than a few days.”
Even in the optimistic scenario where Iran cooperates with the US, it could take a few weeks for export flows to re-establish themselves, Gelder added, saying:
“During that time, oil prices are heavily risked to the upside.
The most recent comparison is during the early days of the Russia/Ukraine conflict, when the fear of loss of Russian supplies drove the oil price to over US$125/bbl.”
Brent crude last traded as high as $100/barrel in 2022, early in the Russia-Ukraine war.
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Introduction: Geopolitics drives up oil prices and hits stocks
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Conflict in the Middle East has triggered fresh geopolitical uncertainty, with investors weighing up the prospect of disruption to oil supplies that would hurt global growth and drive up inflation.
The US-Israeli strikes on Iran which began last weekend have sent investors racing to drive up the price of oil and push down stock markets.
Brent crude, the international benchmark, jumped by 13% when trading began overnight, hitting $82 a barrel, a 14-month high. It’s now up 9% at $79.12 a barrel.
This follows reports that Tehran had warned tankers in the strait of Hormuz that no ship would be allowed to pass through. Around 20% of global oil passes through the strait, so any disruption could lead to supply shortages and higher prices.
Insurers have also warned ship owners they would cancel policies and raise coverage prices for vessels travelling through the Gulf and the strait.
Jim Reid of Deutsche Bank explains:
The spike comes as tanker traffic via the Strait of Hormuz has largely stopped with Iran having attacked three oil tankers over the weekend, though Iran’s foreign minister said on Sunday that Iran was not seeking to close the strait.
There is a view that ahead of the mid-terms, the US administration will do what they can to ensure Iran struggles to block the Strait for long. Investors will also be watching the extent of damage to Iran’s oil export facilities.
In Tokyo, the Nikkei 225 fell by nearly 2.4% as traders in Asia responded to the weekend’s developments, before a partial recovery to 1.35% down in late trading
Other markets have fallen too, with Hong Kong’s Hang Seng down 2%.
There were losses on Middle Eastern markets yesterday, with Saudi Arabia losing 2.2%, Bahrain down 1%, and Kuwait suspending trading altogether.
Here’s the latest:
The agenda
7am GMT: Nationwide: February House Price Index
9am GMT: Eurozone manufacturing PMI for March
9.30am GMT: UK manufacturing PMI for March
9.30am GMT: Bank of England mortgage approvals and consumer credit
12.30pm GMT: Bank of England policymaker Alan Taylor speaks at the Norges Bank monetary policy regulation conference
2pm GMT: ECB President Lagarde speaks at the ECB International Women’s day event
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