Oil prices surged past $100 a barrel for the first time since July on Wednesday, as the escalating conflict around the oil prices Strait of Hormuz crisis choked global supply and sent diesel to a fresh all-time high.
Brent crude, the international benchmark, jumped nearly 3% to $100.72 in early trading. US benchmark crude gained 2.4% to $95.25 a barrel.
Diesel, which has an outsized effect on consumers because it powers shipping and production, hit a record $5.94 per gallon overnight, according to the figures reported Wednesday. That is 9 cents above where it stood on Friday. The average price for a gallon of regular petrol climbed 7 cents overnight to $4.22, more than a dollar higher than at the same point last year, according to AAA.
Military strikes and Houthi attacks fuel the Strait of Hormuz oil crisis
Markets moved sharply after the US military reported striking five Iranian tankers in response to attempted missile attacks on a Navy warship. Separately, attacks by the Iranian-backed Houthi rebel group ignited fires at oil facilities in Saudi Arabia.
The fighting, which began when Israel and the United States initiated a war with Iran, has halted most shipping through the Strait of Hormuz. Before the war, the narrow waterway carried a fifth of the world’s oil supply. The conflict has now run for more than six months.
Brent crude traded between roughly $70 and $100 a barrel for much of March, April and May. In July, prices swung between $72 and $102 as hopes rose and fell over a possible US-Iran agreement to allow stranded tankers to move oil safely out of the Persian Gulf.
Recent stepped-up Houthi attacks have added further pressure, targeting an alternative shipping route that Saudi Arabia had been relying on to transport oil during the war.
Bank of America raises forecast as deal hopes fade
Bank of America analysts said on Tuesday that reaching a durable agreement before the US midterm elections, now just eight weeks away, was “increasingly unlikely” and could remain out of reach even beyond that point.
The analysts raised their oil price forecast for the second half of the year to $83 a barrel, citing more persistent disruptions to Hormuz traffic, though they still expected shipping through the strait to gradually recover.
Should attacks maintain a chokehold on traffic, prices could reach $95 to $120 a barrel, they wrote. Damage to major energy infrastructure could produce spikes of up to $150 a barrel.
Negotiations over a preliminary deal collapsed over control of the strait itself. Iran insists it has the right to set terms and charge fees for ships passing through the waterway off its coast. The US wants passage to remain free and has deployed a Navy blockade to restrict Iranian ports and tankers.
Refinery outages in Russia and reduced refining activity elsewhere have compounded the pressure on diesel and petrol prices globally, Bank of America said. Jet fuel costs have climbed steeply enough that US and international carriers have already cut flights while raising fares and fees.
Bank of America analysts said they still expected Hormuz shipping to pick up gradually, but acknowledged that outcome depended on a deal that, as of Tuesday, appeared no closer.
