Oil Prices Surge on Middle East Hostilities, Uncertain Outlook
Crude oil prices rise for their third day in a row on Wednesday, as fresh hostilities between the US and Iran cast further doubt about a fragile ceasefire.
The unending attacks reduce the outlook for US-Iran peace talks, with the two sides playing cautiously over the nuclear deal and the reopening of the Strait of Hormuz.
Brent crude, the global benchmark for Oil prices, is trading at $97.25 at the time of writing, about 5% up on the week and a few cents below one-week highs of $97.77. U.S West Texas Intermediate crude oil climbed 2.2% to $95.83 a barrel.
The US military announced “self-defence” strikes on Iranian Qeshm island on Wednesday, following reports of Iranian attacks in Gulf countries.
Iran had launched several ballistic missiles toward its neighbours in the region, but all failed to hit their intended targets, Central Command said.
Two Iranian missiles fired at Kuwait fell short or broke apart en route, and three missiles launched at Bahrain were intercepted by U.S. and Bahrain air defense forces, Central Command added.
Kuwait, however, reported significant material damage at its international airport and several wounded people after a drone attack.
These hostilities follow Tehran’s announcement of the suspension of talks with the US and its vow of retaliation for what it considered violations of the ceasefire agreement.
US President Donald Trump reiterated in a Truth Social post on Tuesday that negotiations with Tehran are ongoing and that reports to the contrary are simply fake news.
Markets, however, are growing increasingly sceptical about a negotiated end of the war and a swift reopening of the key Strait of Hormuz, which is driving Oil prices towards the key $100 level.
Deutsche Bank analyst Jim Reid and colleagues warn that the Brent crude barrel could reach $150 if Hormuz remains closed for a long time: “If the Strait of Hormuz experiences a prolonged closure, that would push Brent towards $150/bbl, hitting global growth and pushing Europe into recession.”
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