NEW YORK (AP) — Oil prices rose sharply on Monday US and Israeli attacks on Iran And retaliatory attacks against Israeli and U.S. military installations around the Gulf sent chaos into the world’s energy supply chain.
Traders were betting that oil supplies from Iran and elsewhere in the Middle East would slow or stop. Attacks across the region, including two ships passing through the Strait of Hormuz, the narrow mouth of the Persian Gulf, have limited the ability to export oil to the rest of the world. According to energy experts, prolonged strikes will lead to higher prices of crude oil and gasoline.
West Texas Intermediate, the light, sweet crude oil produced in the United States, was trading for $72.79 a barrel on Monday morning, up about $8.6% from its trading price on Friday, according to CME Group data.
A barrel of Brent crude, the international benchmark, was trading at $79.41 a barrel on Monday morning, according to FactSet, up 9% from its trading price of $72.87 on Friday, a seven-month high.
Higher global energy prices mean consumers will pay more for gasoline at the pump and spend more on food and other goods at a time when many are already feeling the effects of high inflation.
According to Rystad Energy, about 15 million barrels of crude oil per day – about 20% of the world’s oil – are transported through the Strait of Hormuz, making it the world’s most important oil hub. The tankers, which share a border with Iran in the north, transport oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, United Arab Emirates and Iran.
Iran temporarily closed parts of the strait in mid-February for what it said was a military exercise, prompting oil prices to rise about 6% in the following days.
Against this background, eight countries that are part of the OPEC+ oil cartel announced that they will increase crude oil production on Sunday. The Organization of the Petroleum Exporting Countries, at a meeting planned before the outbreak of the war, said it would increase oil production by 206,000 barrels per day in April, which was more than analysts had expected. Countries that have increased production include Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
“About one-fifth of the world’s oil flows through the Strait of Hormuz, an important artery for world trade, meaning markets are more concerned about whether barrels can move than excess capacity on paper,” George Lyon, Rystad’s senior vice president and head of geopolitical analysis, said in an email. “If flows through the Gulf are restricted, additional production will provide limited immediate relief, and access to export routes will be more important than headline production targets.”
Iranian oil prices
