Oil Surges Above USD 100 A Barrel As US and Iran Launch New Attacks, While Gasoline Prices Also Jump

 

 

New York : Oil prices shot past $100 a barrel Wednesday as fighting between the U.S. and Iran escalated, threatening to increase costs for consumers and businesses worldwide.

Brent crude, the international standard, climbed into triple digits for the first time since July and settled at $101.21 a barrel. U.S. benchmark crude was close behind, finishing at $96.05 a barrel a day after attacks on oil facilities and ships in the Middle East raised the risk of further disruptions to global supplies already constrained by war.

New developments in the Middle East, prospects of both peace and renewed hostilities, have caused market whiplash throughout the conflict's more than six months. Oil returning to the $100 mark raises concern because experts have warned that a prolonged period of steep prices would worsen the economic fallout.

 

Crude is the main ingredient of widely used fuels like gasoline and diesel, both of which have become more expensive in recent weeks. Higher energy prices ripple through the global economy, adding to the cost of everything from producing and transporting food, medicines and household goods to daily commutes and air travel.

"Brent breaking above $100 is a major psychological milestone for markets, but the bigger concern is what this means for inflation," Lukman Otunuga, market research head at global broker FXTM, noted.

Political ramifications could pile up in the meantime. U.S. President Donald Trump, who has repeatedly tried to downplay the war he co-launched, said Wednesday that oil prices likely won't come down until after November's midterm elections.

 

What's driving the latest surge in oil prices

Crude oil prices shot up shortly after Israel and the U.S. began their war with Iran in late February. The fighting halted most shipping through the Strait of Hormuz, a narrow waterway where roughly a fifth of the world's oil supply passed before the conflict.

 

Prices have fluctuated considerably over the last six months. Brent surged in the early days of the war and briefly reached nearly $120 a barrel. Prices sometimes swung widely day by day, but the benchmark stood above $100 for a full month in the spring.

Hopes for a lasting peace agreement and a plan to move oil safely out of the Persian Gulf caused the market to cool in the early summer, when prices fell closer to prewar levels of around $70 a barrel. Instead, new attacks mounted, talks between the U.S. and Iran crumbled and oil went up again, albeit with some volatility.

Before Wednesday, Brent last settled above $100 on one day in July but had not dropped below $90 since the end of August.

 

Oil prices rose further Tuesday as hostilities intensified around the Persian Gulf, with U.S. forces destroying five Iranian oil tankers and An Iranian-backed Houthi rebel group striking oil facilities in Saudi Arabia.

Recent attacks by Yemen's Houthis could constrain global oil supplies even more because they targeted an alternative shipping route that Saudi Arabia has relied on to transport oil during the war.