It finally happened, the price of oil surged at the open late on Sunday, with Brent crude rising from $93 to a high of $119, the highest level since 2022 on the back of supply shutdowns across the Gulf. At one stage, the WTI price jumped nearly 30%, its largest daily price gain ever. The oil price has moderated as we move through the morning, and Brent crude is currently trading just above $108 per barrel. As we wait for the start of the trading day, the oil price remains comfortably in triple figure territory, with huge ramifications for financial markets at the start of this week.

The spike in the oil price is dominating global financial markets. There have been sharp losses in equities in Asia overnight, the Nikkei is lower by 5% and the Australian index is lower by nearly 3%. Equity futures markets are pointing to large losses across Europe and the US, and global bonds are tumbling. The UK 10-year Gilt yield is set to surge at the open on Monday, after a 26bp jump last week. The Italian yield, which is moving closely with UK Gilt yields is higher by another 12bps this morning. The UK is paying for natural gas than our European neighbors, so it is natural that our bond market sell off could be worse than Europe’s today.