Oil on track for record monthly surge as Iran war disrupts markets

Oil Market - Brent crude oil price has increased by 51% since the beginning of March, marking its largest monthly gain on record, surpassing the previous record of 46% in September 1990 [1] - Brent closed at $112.57 per barrel on March 31, up from $72.48 per barrel on February 27, with a peak of $119.50 per barrel during March, the highest since June 2022 [2] - West Texas Intermediate crude prices rose by 48% in March, the strongest monthly gain since May 2020, despite a coordinated release of 400 million barrels from emergency reserves [3] Market Reactions - Oil emerged as the best-performing asset in a volatile market, while stocks, government bonds, and precious metals experienced declines [4] - The Dow Jones industrial average fell into correction territory, dropping more than 10% from its record high, as investors anticipated ongoing disruptions to oil supply from the Gulf [7] - The FTSE 100 index in the UK fell over 8%, marking its worst month since March 2020, erasing nearly all gains from January and February [8] Gold Market - Gold prices fell nearly 15% since the start of March, on track for its worst month since 2008, driven by forced selling to cover losses in other market positions [5] - The Turkish Central Bank sold approximately $3 billion of gold, reducing its reserves by nearly 50 tonnes to stabilize the Turkish lira [6] Bond Market - UK government bonds weakened in March, with the yield on 10-year bonds rising by 17% to nearly 5%, the largest monthly increase since September 2022 [9] - Other European government bonds also faced declines, with Italian two-year debt heading for its worst month since May 2018 [9] Economic Outlook - European governments are in a weaker fiscal position compared to 2022, limiting their ability for large-scale fiscal intervention, which may negatively impact demand and growth outlook [10][11]