(March 18): Oil rose on Wednesday after Iran said some of its energy facilities had come under attack, with most of the supply in the wider Pesian Gulf still choked off by the war in the region.
Brent was trading near US$105 ($134.22) a barrel, after adding more than 3% on Tuesday. Iranian state TV said part of the giant South Pars gas field was hit in an airstrike, as were Asaluyeh oil industry facilities. Further details of the attacks hadn’t yet been determined, the reports said.
Iran vowed revenge for attacks that led to the death of its security chief Ali Larijani, while President Donald Trump said the US could end the conflict in the near future.
Gulf nations are still enacting workarounds for Hormuz, with traffic through the vital waterway grinding to a halt. Iraq will resume exports through a pipeline that links the semi-autonomous region of Kurdistan to Türkiye’s Mediterranean port of Ceyhan. But the rerouting can only ship a fraction of the Opec producer’s output, which has dropped to about a third of levels before the war.
Brent crude has rallied almost 70% this year, with the bulk of the surge following the US-Israeli attacks against Iran and Tehran’s retaliatory strikes on energy and shipping assets across the region. The conflict has sent energy prices soaring, triggered fuel shortages in Asia and spawned concerns about faster global inflation.
“The immediate impact of a potential closure of the Strait of Hormuz, something the US administration may have significantly underestimated, is higher energy prices,” said Tamas Varga, an analyst at brokerage PVM. “The US’ objectives in Iran remain unclear, and the end of the conflict is nowhere in sight.”
See also: Oil declines as US, Israel seek to ease concerns over Iran war
Fuel price hikes — with US diesel prices at the pump topping US$5 a gallon this week — will be scrutinised by central bankers around the world as they steer monetary policy. US Federal Reserve officials gather later on Wednesday to set interest rates, though no change is expected.
The oil market’s focus remains firmly on the Hormuz chokepoint, which is effectively closed. Traffic conditions are now shaped by a political calculus, with Iran likely allowing just a handful of vessels to transit based on their affiliations, while deterring or blocking most others.
Though headline price moves have been more muted in recent days, other gauges in crude markets are still seeing wild swings. West Texas Intermediate (WTI) crude’s discount to Brent expanded to more than US$9 at one point on Wednesday, the biggest since July 2022. US futures have weakened in part because of hedging around the release of emergency reserves.
See also: US crude is lagging behind as global oil prices skyrocket
“With no end in sight to hostilities, shut-ins rising on a daily basis, and the strait technically closed, we remain of the view that Brent is set to remain in a new, higher US$95-to-US$110 range,” said Robert Rennie, the head of commodity research at Westpac Banking Corp. “Were we to see a major refinery plant hit or confirmation of additional mining of the strait, we would expect that range to extend higher by another US$10-US$20,” he added.
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