The price of oil rose on Sunday after the US and Israeli attacks on Iran, which killed its supreme leader.
US crude oil soared 12%, while Brent, the international oil benchmark, rose 14% after trading began at 6 pm ET. Sunday.
Even before the weekend spike, oil prices had risen 17% this year due to President Donald Trump’s intensified rhetoric against the Iranian regime. The Trump administration has also increased sanctions on Iran in recent months.
While Iran’s oil production is estimated to be less than 5% of global production (most of which goes to China due to US sanctions), it has great influence over the Strait of Hormuz, a critical passage for more than 20% of the world’s daily oil demand.
A shutdown or restriction there could quickly shake up the global oil market, and would be among the worst-case scenarios for the oil market, longtime industry analyst Andy Lipow said Sunday.
On Friday, US crude oil closed at $67.02 per barrel. Sunday’s increase of more than $8 a barrel could lead directly to higher prices for consumers at the pump as early as this week, some analysts say.
Retail gas prices move about 2.5 cents for every $1 move in the price of crude oil, so a 20-cent per gallon increase could already be on the horizon.
Stock futures also plunged, with futures indicating where the S&P 500 will trade on Monday falling 1.1% and Nasdaq 100 futures falling 1.2%. Dow futures fell more than 500 points.
The US dollar index rose 0.3% and precious metal prices soared, with gold hitting $5,350, an indication that investors and traders are flocking to “safe haven” assets in the wake of the conflict.
“The scale (of Iran’s retaliation) has been a big, big surprise,” Jorge León, head of geopolitical analysis at Rystad Energy, told NBC News on Saturday. “This is a totally different world than what the market anticipated.”
For prices to drop, the market will most likely need tensions to ease and most traffic in the Strait of Hormuz to resume.
On Saturday and Sunday, at least six major cargo shipping companies said they were stopping or diverting ships originally set to sail through the key waterway.
Crude oil may not be the only product affected.
“While much of the focus is on crude oil, Qatar is the second-largest exporter (of liquefied natural gas) behind the United States,” Lipow wrote in a note. “LNG tankers are also being diverted from the region,” he added. “A disruption to LNG supplies would cause natural gas prices to rise, especially in Europe.”
Natural gas prices rose about 2% in early trading.
