Oil prices advanced on Monday after Iran’s Revolutionary Guards warned they could strike Israel’s power plants and energy infrastructure supplying U.S. bases across the Middle East if Iran’s electricity facilities come under attack.
As of 07:31 GMT, Brent crude futures were up $1.57 at $113.76 per barrel. U.S. West Texas Intermediate rose $3.09, or 3.15%, to $101.32 per barrel. Both benchmarks experienced volatile trading during early Asian hours, briefly slipping by $1 after initially gaining around $1.
The surge in WTI also helped narrow its discount to Brent, which had widened to its largest level in 13 years last week.
“Oil sentiment may lurch on threats and rhetoric in the near term, but its more durable direction will continue to be shaped by the state of Middle East oil flows,” said Vandana Hari, founder of oil market analysis firm Vanda Insights.
On Saturday, U.S. President Donald Trump warned that Washington could “obliterate” Iran’s power plants if Tehran does not fully reopen the Strait of Hormuz within 48 hours. The threat came less than a day after Trump suggested the war — now in its fourth week — could be “winding down.”
“It clearly means more escalation, which means higher oil prices. Some are incorrectly thinking, however, that Iran may cave,” said Amrita Sen, founder of Energy Aspects.
“Trump is trying to show he can out-escalate and that way ends in scorched earth for Gulf infrastructure.”
According to Fatih Birol, executive director of the International Energy Agency, the Middle East crisis represents a “very severe” shock to global energy markets and could surpass the scale of the oil crises of the 1970s combined.
The conflict has already damaged key energy facilities in the Gulf and has nearly stopped shipping through the Strait of Hormuz, a vital chokepoint that handles roughly 20% of global oil and liquefied natural gas flows.
Russia said Monday it opposes any attempt to block the Strait of Hormuz but added that the issue must be considered within the wider global context, according to comments from the Russian Foreign Ministry reported by Interfax.
Analysts estimate that between 7 million and 10 million barrels per day of Middle Eastern oil production could be at risk as the conflict continues.
Iraq has declared force majeure across all oilfields operated by foreign companies, according to three energy officials.
Production at Basra Oil Company has been reduced to 900,000 barrels per day from 3.3 million barrels per day, Iraqi Oil Minister Hayan Abdel-Ghani said in a statement issued by the ministry.
Meanwhile, traders say Indian refiners are preparing to resume purchases of Iranian crude, while refiners in other parts of Asia are also evaluating similar steps.
Leave a Reply