Oil stays above $100, stocks slide tracking Middle East war

Oil prices stayed over $100 per barrel Friday while stock markets slid, with no end in sight to disruption in crude supplies as war rages on in the Middle East. With the conflict heading toward its third week, equity markets continued falling amid investor worries of an extended crisis that could fan inflation and hammer the global economy. The price of Brent crude, the benchmark international oil contract, dipped below $100 during the day, sending equities briefly higher. But stocks slid back into the red as Brent climbed back above the $100 mark. It closed at $103.14 per barrel, and has soared by more than 42 percent since the start of the conflict. US-Israeli strikes on Iran on February 28 plunged the Middle East into war, sparking a surge in fuel prices as Tehran vowed to choke the Strait of Hormuz -- a critical artery for global energy transport. "Crude oil is continuing to dictate direction for markets as we head towards the end of a volatile week," said Fawad Razaqzada, market analyst with Forex.com. "The pressure remains with no end in sight in the Middle East conflict," Razaqzada added. "Traders are trying to figure out what a fair value for crude oil is right now, given the big release of emergency oil reserves, and the temporary relaxation of sanctions on Russian oil sales that's already at sea," he said. Iran's threats over the Strait of Hormuz, through which a fifth of global crude oil and liquefied natural gas passes, is causing worries of rising prices rippling through the world economy. "Fears of a burgeoning energy crisis remain front and center for investors," noted Joshua Mahony, chief market analyst at Scope Markets. "Inflationary fears are particularly prevalent," Mahony added. Major central banks, which prior to the war's outbreak were heavily forecast to keep cutting interest rates, are now widely expected next week to freeze borrowing costs or even hike them to keep a lid on inflation. An unprecedented seven central banks are due to hold meetings on interest rates next week. Investors also digested updated US economic growth data for the fourth quarter, which was revised down to 0.7 percent from an initial reading of 1.4 percent. And delayed data showed the US Federal Reserve's preferred inflation gauge had dipped to 2.8 percent in January. This is still higher than the Fed's two-percent inflation target, and reflects a period before energy prices shot higher. The US central bank now faces an environment where inflation remains sticky and could soon be boosted by energy prices, while GDP growth and the labor market continue to lose momentum, said eToro US Investment Analyst, Bret Kenwell. On foreign exchange markets, the dollar held gains against major rivals owing to its safe-haven status and expectations that US interest rates will remain elevated longer than expected. AJ Bell investment director Russ Mould said next week's central bank meetings "come at a delicate time." "Markets will be watching closely for any signals on how they plan to deal with surging oil and gas prices and whether they see it as a short-term bump to look through." Key figures at around 2055 GMT Brent North Sea Crude: UP 2.7 percent at $103.14 per barrel West Texas Intermediate: UP 3.1 percent at $98.71 per barrel New York - Dow: DOWN 0.3 percent at 46,558.47 points (close) New York - S&P 500: DOWN 0.6 percent at 6,632.19 (close) New York - Nasdaq Composite: DOWN 0.9 percent at 22,105.36 (close) London - FTSE 100: DOWN 0.4 percent at 10,261.15 (close) Paris - CAC 40: DOWN 0.9 percent at 7,911.53 (close) Frankfurt - DAX: DOWN 0.6 percent at 23,447.29 (close) Tokyo - Nikkei 225: DOWN 1.2 percent at 53,819.61 (close) Hong Kong - Hang Seng Index: DOWN 1.0 percent at 25,465.60 (close) Shanghai - Composite: DOWN 0.8 percent at 4,095.45 (close) Euro/dollar: DOWN at $1.1416 from $1.1514 on Thursday Pound/dollar: DOWN at $1.3223 from $1.3346 Dollar/yen: UP at 159.74 yen from 159.39 yen Euro/pound: UP at 86.33 pence from 86.27 pence