Oil Prices Jump Above $100 a Barrel for First Time in Four Years
Oil prices surged past $110 a barrel late Sunday, topping $100 for the first time in nearly four years, as the war in the Middle East entered its ninth day with no end in sight and the Strait of Hormuz remained effectively closed to tanker traffic.
Brent crude, the international benchmark, briefly rose above $110 shortly after markets opened Sunday evening, while West Texas Intermediate climbed to $109.05. Both benchmarks were trading around $60 per barrel in early January.
President Trump sought Sunday evening to reassure Americans that oil prices would fall in the short term.
“Short-term oil prices, which will fall rapidly once the Iranian nuclear threat is destroyed, are a very small price to pay for the United States and the world, for security and peace. ONLY FISCONS WILL THINK DIFFERENTLY!” Trump said on Truth Social.
The rise follows a record weekly gain last week — Brent soared 30 percent, its biggest weekly rise in six years — as the conflict that began with U.S. and Israeli strikes on Iran on Feb. 28 strangled a waterway that normally handles about a fifth of the world’s oil supply.
The closure of Hormuz is now forcing Gulf producers to reduce production as onshore storage fills. Iraq has cut production by about 60 percent, to between 1.7 and 1.8 million barrels per day, compared to about 4.3 million before the conflict, according to reports. Kuwait declared force majeure over its oil exports over the weekend, and Abu Dhabi also began cutting production in offshore fields. Saudi Arabia, meanwhile, is working to redirect its crude shipments to its Red Sea port of Yanbu via its East-West pipeline, even though it does not have enough cargo capacity and tankers to fully compensate, Bloomberg News reported.
Stock futures indicated that the Dow Jones Industrial Average and Nasdaq Composite Index were expected to fall 1.9 percent on Monday.
American motorists are already feeling the impact at the pump, with the national average for a gallon of regular gasoline having risen about 16 percent since the start of the war, to $3.45, according to AAA. Diesel prices rose even faster, by around 22 percent.
Energy Secretary Chris Wright sought to calm markets on Sunday, telling CNN that the world was not short of oil and that disruptions to shipping through the strait would last weeks in the worst case, not months. Trump, speaking Saturday, was also dismissive of the price surge. “It’s an excursion,” he said. “We thought oil prices would go up, which they will, they will also go down, they will go down very quickly.”
The administration announced Friday that it would provide up to $20 billion in marine reinsurance to ships operating in the Persian Gulf. But shipowners say insurance costs are not their main concern: They want a full naval escort or an end to hostilities before risking their crews in the strait.
Analysts warn that prices could rise further. Goldman Sachs said Friday that crude and refined products could reach unprecedented levels if Hormuz flows remain depressed through March. Brent’s record high was $147.50 a barrel, set on the eve of the 2008 financial crisis, which is equivalent to about $218 in today’s dollars.
The effects are being felt hardest in Asia, which relies heavily on supplies from the Gulf. In Japan, which imports more than 90 percent of its crude from the region, refiners have demanded access to national oil reserves. China has cut fuel exports to protect domestic supplies, and South Korea is considering reinstating an oil price cap for the first time in 30 years. The flagship Australian shares index fell 3.5 per cent on Monday morning. Japan’s Nikkei plunged more than six percent.
