Oil prices soared to near $120 per barrel as the Iran war intensified, threatening production and shipping in the Middle East and roiling financial markets.
Brent crude, the international benchmark, rose to $119.50 per barrel earlier in the day but later traded at $106.23 per barrel.
West Texas Intermediate, the lightest, sweetest crude oil made in the United States, rose to $119.48 a barrel but fell to $101.25.
The war toll on civilian targets rose as Bahrain accused Iran of striking a desalination plant vital to its drinking water supply, and oil depots in Tehran went up in smoke after an overnight strike by Israel.
As the war, now in its second week, oil prices have soared, trapping countries and places critical to the production and movement of oil and gas from the Persian Gulf.
Prices moderated after the Financial Times reported that some members of the Group of Seven industrialized nations were considering releases of strategic oil reserves to ease pressure on markets. The unconfirmed report cited unnamed people familiar with the talks.
Roughly 15 million barrels of crude oil — about 20 percent of the world’s oil — are typically shipped through the Strait of Hormuz every day, according to independent research firm Ristad Energy. The threat of Iranian missile and drone attacks has halted travel through the strait, bordered by Iran in the north, carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran.
Iraq, Kuwait and the UAE have cut oil production as storage tanks fill up due to reduced capacity to export crude oil. Iran, Israel and the United States have attacked oil and gas facilities since the war began, exacerbating supply concerns.
US President Donald Trump said on Saturday he was not interested in talks with Iran and suggested the war would end only when Iran no longer has a functioning military or leadership in power.
Further boosting hopes for peace, Iran on Monday designated Mojtaba Khamenei as supreme leader to succeed his father Ali Khamenei, signaling hardliners’ continued hold on power.
Read moreWho is Mojtaba Khamenei, the son and successor of Supreme Leader of Iran?
A surge in oil and natural gas costs is driving up fuel prices, cascading through other industries and weighing on Asian economies that are particularly vulnerable because of the region’s heavy reliance on imports from the Middle East.
Brent and US crude futures last traded near current levels in 2022 after Russia invaded Ukraine.
Higher energy costs increase inflation, strain household budgets and reduce consumer spending, which is a key driver of many large economies.
Tokyo’s benchmark Nikkei 225 index fell 5.2% on Monday and other markets also foundered. US futures were down more than 1.5 percent.
On Friday, the S&P 500 fell 1.3 percent and the Dow fell 945 points before closing with losses of nearly 450. The Nasdaq composite fell 1.6 percent.
In the US, a gallon of regular gasoline rose to $3.45 on Sunday, up about 47 cents from a week ago, according to the AAA Motor Club. Diesel is selling for about $4.60 a gallon, an increase of about 83 cents for the week.
Energy Secretary Chris Wright, speaking on CNN’s “State of the Union,” said U.S. gas prices will return to $3 a gallon “before long.”
“Look, you never know the time frame of this, but, in the worst case, it’s a matter of weeks, it’s not a matter of months,” Wright added.
If oil prices are above $100 per barrel, some analysts and investors say that is too much for the global economy to withstand.
Israeli attacks on oil depots and a petroleum transfer terminal in Tehran early Sunday morning killed four people, Iranian officials said. Israel’s military said Iran’s military was using the depots for fuel to launch missiles. Mohammad Bagher Ghalibaf, the speaker of Iran’s parliament, warned that the war’s impact on the oil industry would be spiraling.
Iran exports roughly 1.6 million barrels of oil per day, mostly to China, which may have to look elsewhere for supplies if Iran’s exports are disrupted, another factor driving up energy prices.
During the war the price of natural gas rose, although not as much as oil. Late Sunday it was selling for about $3.33 per 1,000 cubic feet. That was 4.6 percent higher than Friday’s closing price of $3.19, after rising nearly 11 percent last week.
(France 24 with AP and AFP)
(Tags to translate)Economy(T)Oil and Gas Industry(T)Iran(T)Stock Markets(T)Strait of Hormuz(T)Economy
