Oil prices jumped by 4% in Asian trade on Monday, following a weekend of intense U.S. strikes on Iran, claims from Iran that the Strait of Hormuz is closed to traffic once again, and Iranian strikes on five U.S. allies in the region.
Brent Crude futures surged by 4% to top $79 per barrel in Asian trading, to the highest level in more than three weeks, as the market fears this weekend’s hostilities may not subside as easily as in previous short-term instances of flare-ups.
WTI Crude, the U.S. benchmark, jumped by 4.13% to $74.36 a barrel.
“Hopes of a relatively quick resolution to the recent skirmishes may be in doubt after tension escalated over the weekend,” analysts at ANZ said in a note carried by Reuters.
During the weekend, the re-escalation in the Middle Eastern region intensified, with the U.S. military conducting new strikes on Iran, and Iran retaliating by firing missiles at U.S. allies in the area, including Bahrain, Kuwait, Qatar, Jordan, and even Oman, which sits on the tip of the Strait of Hormuz opposite Iran.
The U.S. and Iran are also at odds about the navigability of the Strait of Hormuz. Iran this weekend claimed the chokepoint is closed, once again. The U.S., however, continues to insist that the Strait is open.
“Clearly, the risk is that this escalates to levels seen early in the war, where neighbouring countries and their energy infrastructure are also targeted,” ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a note early on Monday.
“Escalation has slowed vessels transiting the strait to a trickle, renewing concerns over oil supply tightness through the third quarter,” the strategists said.
While oil was surging due to the latest escalation, equity and bond markets fell in Monday trade in Asia and Europe, as the markets started pricing in again protracted disruption at the Strait of Hormuz.
By Tsvetana Paraskova for Oilprice.com
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