CHICAGO — For the first time in over three and a half years, oil prices soared past the $100 per barrel mark on Sunday. This surge is attributed to the ongoing conflict in Iran, which is disrupting production and transportation in the Middle East.
Brent crude, the global benchmark for oil prices, reached $107.97 per barrel as trading resumed on the Chicago Mercantile Exchange. This marks a significant 16.5% increase from its closing price of $92.69 on Friday.
Similarly, West Texas Intermediate (WTI), the light, sweet crude oil extracted in the U.S., was priced at approximately $106.22 a barrel. This reflects a 16.9% rise from its previous close at $90.90.
As the trading day progresses, these prices may fluctuate further.
The current price hikes follow a dramatic increase last week where U.S. crude prices surged by 36% while Brent crude rose by 28%. This sharp rise is linked to the ongoing war, now entering its second week, which has impacted key regions essential for the extraction and distribution of oil and gas from the Persian Gulf.
According to Rystad Energy, a noted independent research firm, the Strait of Hormuz typically sees the passage of around 15 million barrels of crude oil daily, constituting about 20% of global oil supply. However, due to the looming threat of Iranian missile and drone attacks, tanker movement through this critical waterway has virtually ceased. This strait, flanked by Iran to the north, is a vital corridor for the transportation of oil and gas from countries like Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates, and Iran itself.
Iraq, Kuwait and the UAE have cut their oil production as storage tanks fill due to the reduced ability to export crude. Iran, Israel and the United States also have attacked oil and gas facilities since the war started, exacerbating supply concerns.
The last time U.S. crude futures traded above $100 per barrel was June 30, 2022, when the price reached $105.76. For Brent, it was July 29, 2022, when the price hit $104 per barrel.
The global surge in oil prices since Israel and the U.S. attacked Iran on March 1 has rattled financial markets, sparking worries that higher energy costs will fuel inflation and lead to less spending by U.S. consumers, the main engine of the economy.
In the U.S., a gallon of regular gasoline rose to $3.45 on Sunday, about 47 cents more than a week earlier, according to AAA motor club. Diesel was selling for about $4.60 a gallon, a weekly increase of about 83 cents.
Energy Secretary Chris Wright, speaking on CNN’s “State of the Union,” said U.S. gas prices would be back under $3 a gallon “before too long.”
“Look, you never know exactly the time frame of this, but, in the worst case, this is a weeks, this is not a months thing,” Wright added.
If oil prices stay above $100 per barrel, some analysts and investors say it could be too much for the global economy to withstand.
Iranian authorities said strikes by Israel on oil depots in Tehran and a petroleum transfer terminal early Sunday killed four people. Israel’s military said the depots were being used by Iran’s military for fuel to launch missiles. Mohammad Bagher Qalibaf, the speaker of Iran’s parliament, warned that the war’s impact on the oil industry would spiral.
Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which may need to look elsewhere for supply if Iran’s exports are disrupted, another factor that could increase energy prices.
The price of natural gas also has climbed during the war, though not by as much as oil. It was selling for about $3.33 per 1,000 cubic feet late Sunday. That’s 4.6% higher than its Friday closing price of $3.19, after rising about 11% last week.
U.S. stock index futures, a bellwether for the market, fell late Sunday, pointing to Wall Street’s main indexes opening down on Monday. The future for the S&P 500 was down 1.6%, while the Dow’s fell 1.8%. The future for the Nasdaq composite was down 1.5%.
On Friday, the S&P 500 dropped 1.3% and the Dow plunged as many as 945 points before finishing with a loss of roughly 450, and the Nasdaq sank 1.6%.
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