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Oil prices jumped on Thursday after a new wave of attacks on energy infrastructure in the Gulf reignited fears of prolonged disruption to global supply and briefly sent Brent crude back above $100 a barrel.
In a sign of the heightened volatility in energy markets, Brent crude, the international benchmark, shot up as much as 10 per cent to $101.59 before giving up some of the gains to trade up 5 per cent at $96.35.
As the war entered its 13th day, two oil tankers were on fire off the coast of Basra in Iraq following suspected Iranian strikes and a container vessel was struck near Dubai’s Jebel Ali.
In Bahrain, fuel tanks at an oil storage facility in Muharraq were set ablaze, with the government blaming “Iranian aggression”.
The renewed attacks came just a day after the International Energy Agency launched a record release of its oil reserves in an attempt to ease the severe global energy shock sparked by the conflict.
Since the US and Israel first attacked Iran almost two weeks ago, shipping in the Strait of Hormuz, a narrow waterway through which a fifth of global oil and gas supplies pass, has ground to a virtual halt.
Helima Croft, head of global commodity strategy at RBC Capital Markets, said: “Despite the IEA announcing the largest strategic stockpile release in history, the ultimate price trajectory will probably hinge on when the US can ensure the security of the Strait of Hormuz.”
The higher oil and gas prices on Thursday reverberated across financial markets, with stocks under pressure. The Stoxx Europe 600, Europe’s benchmark index, fell 0.4 per cent while US futures pointed to a 0.4 per cent drop in the S&P 500.
“There’s a gradual realisation that the so-called ‘soon’ end to the conflict may take longer than expected,” said Anthony Yuen, head of energy strategy at Citigroup.
Brent crude gave up some of the gains made in Asia to trade up 5 per cent at $96.35 early in the London day.
US President Donald Trump said on Monday that the war would be over “very soon” but investors are increasingly worried there could be a repeat of the Red Sea crisis in late 2023, which dragged on despite US air strikes.
Yuen pointed out that during the war between the US and Iran-backed Houthi rebels in Yemen, the US also used overwhelming displays of air superiority but that the Houthis continued to be able to disrupt shipping through the Red Sea with relatively inexpensive drones and missiles.
“One could think about whether the Red Sea disruption could provide some guidance. The US hit the Houthis quite aggressively but the Red Sea was still disrupted until eventually the sides reached an agreement,” Yuen said.
“People are not factoring in a repeat of the Red Sea disruption. If that repeats, the market is not pricing the severity of what would happen.”
