Oil prices have surged past the $100 per barrel mark for the first time since May, driven by escalating tensions in the Middle East after Donald Trump stated he is considering a "massive strike" on Iran. The move has triggered a sell-off in both US stocks and bonds.
The international benchmark Brent crude closed Thursday up 7% at $100.69 per barrel. Attacks by Iran-backed Houthi rebels in the Red Sea have heightened fears of further tightening in global crude supply, sparking renewed concerns about a global inflationary shock. Oil prices remained volatile during Friday's Asian trading session, with Brent crude hovering around $100.50 per barrel.
This month has seen a rapid rebound in oil prices. The Houthi group, which previously announced attacks on two Saudi oil tankers, has declared a maritime blockade on Saudi Arabia this week, intensifying market panic. Investors are increasingly worried about the potential for a full-scale conflict between the United States and Iran.
In an interview Thursday, US President Donald Trump stated, "I am considering a massive strike, the likes of which have never been seen. I am about to make a decision, and all preparations are in place."
On Thursday evening in Washington, the US military announced it had conducted airstrikes against Iran for the 13th consecutive night.
This week, Trump has made a series of strong statements escalating the conflict, threatening to strike Iran's nuclear facilities and civilian targets. He stated earlier this week that US forces would target Iran's nuclear facilities buried deep within "Mount Khorasan." He later suggested that the US would destroy an Iranian bridge or power plant in response to any attack by Iranian forces on vessels in the Strait of Hormuz.
On Thursday, Trump issued a warning to both the Houthi rebels and Iran, stating that if attacks continue, they would face "major military punishment." He subsequently added that all damages to ships and cargo would be compensated using Iranian assets seized and controlled by the US.
Brent crude last traded firmly above $100 on May 26. Following that, the US and Iran reached an agreement to extend a ceasefire and reopen the strait, leading to expectations that oil transport through the waterway would quickly resume, causing a significant drop in oil prices in June.
US gasoline prices have continued to rise, breaking above $4 per gallon earlier this week. With the November midterm elections approaching, high fuel prices could exacerbate voter dissatisfaction with Trump.
Markets have long been concerned that the Houthi group could coordinate with Iran to block the Bab el-Mandeb strait, putting pressure on energy markets and global trade.
Helima Croft, Global Head of Commodity Strategy at RBC Capital Markets, commented that given the latest attacks, oil prices could potentially break above the $139 per barrel high set during the 2022 Russia-Ukraine conflict, and even challenge the all-time peak of $147 per barrel reached in 2008.
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