Oil surges above $100 as Gulf attacks disrupt supplies, rattle global markets
Oil prices surged on Thursday, briefly rising above $100 per barrel, while global stock markets extended losses as fresh attacks on energy infrastructure in the Gulf heightened fears of a major supply shock.
The surge came despite a record release of crude reserves by major economies, as escalating tensions in the Middle East threatened to choke one of the world’s most critical oil routes.
The International Energy Agency (IEA) warned that the ongoing conflict in the Middle East is creating “the largest supply disruption in the history of the global oil market”.
The warning came a day after IEA member countries agreed to release 400 million barrels of oil from strategic reserves, the largest coordinated drawdown ever.
However, the move failed to calm markets as the Strait of Hormuz – through which about one-fifth of global crude passes – has effectively been shut down following Iranian retaliatory attacks on shipping and neighbouring Gulf states.
An attack on two oil tankers off Iraq killed at least one crew member, while another cargo vessel caught fire after being struck by shrapnel.
In its latest market report, the IEA said global crude production had fallen by at least 8 million barrels per day, with an additional 2 million barrels of petroleum products also affected – amounting to roughly 7.5% of global daily output.
The price of Brent crude, the international benchmark, climbed to $101.59 per barrel during trading on Thursday before easing slightly.
Oil prices later resumed their upward climb after US President Donald Trump said preventing Iran from acquiring nuclear weapons was more important than keeping oil prices low.
At around $100 per barrel, Brent is now about 38% higher than it was before the conflict began 13 days ago, when the United States and Israel launched airstrikes against Iran.
“Energy markets have been rattled by news of Iranian attacks on shipping in the Persian Gulf, along with missiles aimed at countries across the region,” said David Morrison, an analyst at Trade Nation.
He added that the United States’ failure to reopen the Strait of Hormuz suggested there were limits to its ability to secure shipping in the region.
The IEA’s emergency oil release is equivalent to about 20 days of crude shipments that normally transit through the Strait of Hormuz.
But Morrison said the move had failed to achieve its intended effect.
“If the announcements of the release of oil from strategic reserves were supposed to cap prices, then they failed dismally,” he said.
Rising oil prices are already affecting the aviation industry.
New Zealand’s national carrier announced plans to cancel 1,100 flights over the next two months, while Hong Kong airline Cathay Pacific introduced new fuel surcharges on most routes. Air France-KLM also said it would raise ticket prices.
“The longer the oil price remains elevated, the more damaging and long-lasting the inflation shock will be for the global economy,” said Kathleen Brooks, research director at trading group XTB.
Financial markets reacted negatively to the escalating tensions.
On Wall Street, the Dow Jones Industrial Average fell more than 1% shortly after the opening bell, while the S&P 500 and Nasdaq Composite also declined.
Most European markets traded lower in afternoon dealings, and major Asian markets closed in negative territory.
Meanwhile, the US dollar strengthened against most major currencies as investors sought safe-haven assets.
“The dollar has strengthened, driven by safe-haven demand, fears of inflation, and expectations that interest rates will remain higher for longer,” said Victoria Scholar, head of investment at Interactive Investor.