8 January 2020
Oil prices have receded, after
rising following an Iranian attack on two bases hosting US troops in Iraq.
Financial markets were also
relatively calm despite the conflict, amid investor hopes that the two sides
would avoid further escalation.
US President Donald Trump said he
would seek additional economic sanctions, but he stopped short of calling for
military action.
The three main share indexes in the
US closed the day up about 0.5% or more.
While oil prices had jumped to an
almost four-month high overnight, they fell back during trade on Wednesday.
Brent Crude was down more than 3% to about $65.78 per barrel by mid-day in New
York and West Texas International fell more than 4%.
Despite that pullback, oil prices
remain nearly 25% higher over the last 12 months, due in part to rising
tensions in the Middle East.
Iranian state television said the
attack was a retaliation for the killing of the country's top commander Qasem
Soleimani
The attack happened just hours after
the funeral service for Soleimani, who was killed by a US drone strike on
Friday.
His death had raised concerns that
the conflict between the US and Iran could escalate further.
That could disrupt shipping in the
world's busiest sea route for oil, the Strait of Hormuz. Around a fifth of
global oil supply passes through the strait which connects the Gulf with the
Arabian Sea.
The Strait of Hormuz is vital for
the main oil exporters in the Gulf region - Saudi Arabia, Iraq, the UAE, and
Kuwait - whose economies are built around oil and gas production. Iran also
relies heavily on this route for its oil exports.
Qatar, the world's biggest producer
of liquefied natural gas (LNG), exports nearly all its gas through the strait.
After the latest attacks, the US
aviation regulator banned American airlines from flying over Iraq, Iran and
neighbouring countries. The ban includes the Gulf of Oman and the waters between
Iran and Saudi Arabia.
The Federal Aviation Administration
(FAA) said the decision was in response to heightened military activity, and
increased political tension in the region.
Before the latest guidance, the FAA
had already prohibited US airlines from flying below 26,000 feet (7,925 metres)
over Iraq and from flying over an area of Iranian airspace above the Gulf of
Oman since Iran shot down an American drone in June 2019.
At the same time Singapore Airlines
has said that all of its flights would now be diverted from Iranian airspace.
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