In 2022, oil prices hit $100 a barrel for the first time since the first months of Russia’s invasion of Ukraine, while the fastest oil race since the 1980s shows no sign of abating.
Global price benchmark Brent crude ( BZ=F ) and U.S. benchmark West Texas Intermediate crude ( CL=F ) both hit $108 a barrel almost immediately after opening trading at 6 PM ET on Sunday. Brent crude and WTI crude are now up more than 50% and 60%, respectively, since the conflict began.
US futures slipped into the red as the session opened. Futures on the S&P 500 (ES=F) and Nasdaq 100 (NQ=F) both lost nearly 1.5%, while contracts on the Dow Jones Industrial Average (YM=F) lost a deeper 2%.
Oil prices rose to their biggest weekly gain since 1985 after the US and Israel launched airstrikes against Iran on February 28, killing Supreme Leader Ali Khamenei and retaliating violently against the Iranian regime.
Critically, the conflict has disrupted tanker traffic through the Strait of Hormuz. About 20 million barrels of oil a day, or about one-fifth of the world’s marine oil supply, pass through waterways that connect the Persian Gulf to the vast international market. Vortexa data shows that approximately 16 million bpd of oil remain behind the strait and are cut off from the global market.
Macquarie strategist Vikas Dwivedi wrote in a recent client note that “a few weeks of the Hormuz shutdown will set off a domino effect of events that could push crude to $150 or more.”
In the week since US and Israeli airstrikes began, what began as a regional conflict aimed at destroying Iran’s nuclear capabilities and potentially prompting regime change has escalated into a war that has engulfed the Middle East.
Airports, apartments, military bases and other infrastructures in Saudi Arabia, the United Arab Emirates, Bahrain, Oman and a number of other countries are under attack by missiles and drones from Iran. The skies above Iran turned black over the weekend after airstrikes hit oil depots near the cities of Tehran and Khawarij.
The conflict has also increasingly affected energy infrastructure across the region, further threatening supply chains already stretched to their limits.
Bahrain’s BAPCO Energy Refinery has been attacked. Saudi Arabia’s Ras Tanura refinery is out of business. And Qatar’s Ras Laffan LNG complex has announced a power outage. Oil tankers in the Persian Gulf have been targeted by missiles and drones, and Iran’s Revolutionary Guard has threatened violence against any ship that tries to cross the strait, even if they declare the route “open.”
Oil prices
