The world needed a spike in oil prices like a hole in the head. Just as one of the pinch points in the global economy had started to ease, Saudi Arabia and its counterparts in OPEC have unveiled a surprise output cut.
Danni Hewson, head of financial analysis at AJ Bell, said: “The decision by the oil producers’ cartel, unusually taken outside of any officially scheduled meeting, represents a flexing of its muscles and potentially a pre-emptive move as it anticipates a drop-off in crude demand relating to the collapse of SVB and ensuing banking crisis.
“It is this crisis which has helped box central banks in when it comes to their ability to control inflation as they have to think about their role in preserving financial stability too.
“Rising oil prices imply higher costs of energy, transportation and other areas like plastic. The heavy exposure of the FTSE 100 to energy and resources stocks is looking like an attribute again as index heavyweights BP and Shell help lift the index. It is telling that the more domestic focused and diversified FTSE 250 is down a smidge on Monday.
“Manufacturing PMI figures from the US later today and jobs numbers at the end of the week will be closely monitored as investors seek to work out what exactly the Federal Reserve is going to do when confronted with this mess.”