Oil Still Waiting and Seeing as Trump War Heats Up
Oil is steady after rising about 10% since Israel launched its strikes on Iran last week, as speculation the U.S. might join the conflict stoked concerns about supply disruptions in the Middle East.
Brent is trading near $77 a barrel, while West Texas Intermediate is above $75 after closing at its highest in nearly five months on Tuesday. President Donald Trump demanded Iran’s “UNCONDITIONAL SURRENDER” and warned of a possible attack on the country’s leader Ayatollah Ali Khamenei in a social media post, before meeting with his national security team.
Iran’s crude export infrastructure has so far been spared, and the impact has been largely limited to shipping. The Middle East produces about a third of the world’s oil and a wider conflict could push prices even higher.
The hostilities have roiled global markets, with investors seeking shelter in assets such as gold, and oil volatility has soared to a three-year high. Brent’s flash spread has surged, signaling concerns about tightening supplies, and options are more bullish than they were after Russia’s invasion of Ukraine in 2022.
The biggest concern for oil markets centers on the Strait of Hormuz, though there are no signs that Tehran is trying to disrupt shipping through the narrow waterway at the entrance to the Persian Gulf. About a fifth of the world’s crude output passes through the strait, including from Saudi Arabia.
“Trump’s demand for Iran’s ‘unconditional surrender’ and threats against its supreme leader suggest diplomacy is unlikely,” said Charu Chanana, chief investment strategist at Saxo Markets Ltd. in Singapore. “A worst-case scenario, a blockade of Hormuz, could send prices through the roof,” he added.
Israel launched a surprise attack on Iranian nuclear sites late last week, but American weapons are seen as crucial to achieving a more complete destruction of Tehran’s atomic program than anything it could do on its own.
Prime Minister Benjamin Netanyahu has sought to draw the U.S. — which has provided defensive support against Iranian missile fire — deeper into the conflict. He told ABC News on Monday that the two countries share a common enemy in Iran, and that it is in America’s interest to support Israel.
Iran has prepared missiles and other military equipment for attacks on U.S. bases in the Middle East if it joins Israel in a war against it, the New York Times reported, citing unnamed U.S. officials who have reviewed intelligence reports.
Meanwhile, U.S. industry figures showed the country’s crude inventories fell by more than 10 millimeters.
Brent for August settlement rose 0.4% to $76.79 a barrel at 12:01 p.m. in Singapore after closing 4.4% higher on Tuesday. WTI for July delivery rose 0.4% to $75.25 a barrel.
Source: Bloomberg
