Oil prices rose to their highest levels in four years on Thursday before retreating, as concerns over the brewing US-Iran war rattled global energy markets and stoked concerns about disruption in the Strait of Hormuz.
Brent crude, the global oil benchmark, briefly rose to $126.41 a barrel overnight, its highest level in four years, before retreating to $115.8 as market activity slowed. Meanwhile, West Texas Intermediate crude fell 0.7% to $106 a barrel.Even after the decline, Brent crude remains well above its pre-war level of $73 a barrel, and has nearly doubled since the start of the year, when tensions between Washington and Tehran began to rise.
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Has the American blockade been challenged? An Iranian tanker carrying crude worth $220 million arrives in the Asia-Pacific region He watches”
The rise in crude oil prices is already feeding consumers. Across the United States, average gasoline prices rose to $4.30 a gallon on Thursday, the highest national average in four years, according to AAA.Market anxiety has intensified as traders ponder the consequences of the Strait of Hormuz remaining effectively closed. The strategic waterway typically handles about 20% of the world’s oil and natural gas flows, making any long-term closure a major threat to global supply chains.
Economic warnings are getting louder. Analysts cited by CNN say an extended disruption to oil flows in the second half of the year could push the global economy into recession, with many countries already facing fuel shortages, inflationary pressures and weak household demand.The ripple effects have been felt outside gas stations. Oil-related materials such as plastics, synthetic rubber and textiles are becoming more expensive, while food costs are also rising.
In Asia, where economies rely heavily on imported energy and large-scale manufacturing, shortages have already begun to strain supplies of medical gloves, cosmetics and instant noodles.Vandana Hari, founder of Vanda Insights, said oil prices “have nowhere to go but up” until the strait can be permanently reopened. “So far, how and when that might happen is anyone’s guess,” she added.Part of Thursday’s sharp price movement was also linked to futures market mechanics. Neil Wilson, a strategist at Saxo Bank, said the expiration of widely tracked June futures had shifted trading to July contracts, which were priced above $110 a barrel.Adding to the volatility, Deutsche Bank analysts said the “key catalyst” behind the overnight rise was an Axios report that the United States may be preparing for “short and strong” strikes on Iran, CNN reported.Oil prices have now risen for eight consecutive sessions as diplomatic efforts between the United States and Iran falter, reducing hopes for a near end to the conflict.“The oil market has gone from…hoping for a solution to focusing squarely on physical scarcity and the long-term threat to supplies with potential escalation of the conflict now looming,” Wilson wrote in a note.Shipping data has highlighted the scale of the crisis. Daily oil tanker movements through the Strait of Hormuz have collapsed into single digits since the war began in late February, prompting the International Energy Agency to describe the outage as “the largest supply disruption in history.”Janiv Shah, vice president of oil markets at Rystad Energy, said any additional military escalation could lead to greater price gains.“Further escalation and any attacks on energy infrastructure may force record oil prices to rise rapidly,” Shah said. He also warned that continued pressure on prices could deepen signs of weak global oil demand that have already appeared in the market.
