(Bloomberg) — Brent oil tumbled below $80 a barrel as expectations for more stimulus from China fizzled, sparking a risk-off mood across markets.
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The global benchmark lost as much as 2.2%, snapping a five-day rally, while West Texas Intermediate traded near $76 a barrel. A much anticipated briefing by China’s top economic planner after a week-long holiday ended without any significant new spending measures, disappointing investors.
Still, the oil market remains susceptible to a flare-up in the Middle East. Traders are watching for Israel’s retaliation against Iran following a missile attack last week, which raised concerns over an all-out war.
“Crude is not getting the love from China that Chinese equities are,” said Vishnu Varathan, the Asia head of economics and strategy for Mizuho Bank Ltd. in Singapore. “Perhaps because the path of least resistance for the liquidity deluge is to the equity markets” rather than commodities, he added.
Iron ore and base metals declined, while a gauge of Chinese shares listed in Hong Kong slid 10%. The Tuesday briefing was held by the National Development and Reform Commission to discuss a package of policies aimed at boosting economic growth, but the planner stopped short of large stimulus.
Israel, meanwhile, escalated fighting with Iran-backed groups on Monday, keeping the market on edge. The region accounts for a third of global crude supply, and President Joe Biden has sought to discourage Israel from attacking Tehran’s oil fields.
Other markets have been jolted by the hostilities, with a gauge of implied volatility for Brent near the highest in a year. There’s been a deluge of call options — which profits buyers when futures gain — and the premium of Brent calls over puts swelled to the widest in a year as of Monday’s close.
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