Oil jumps to $105, pushing up chances of a US interest rate increase
Oil prices rose about 4% on Thursday, pushing Brent above $105 a barrel and West Texas Intermediate past $100, after a surge in attacks on tankers raised fears of further supply disruptions. The escalation in strikes around the Red Sea and Strait of Hormuz, together with stronger Chinese crude buying, tightened markets and lifted inflation and interest-rate expectations.
Why It Matters
Rising crude costs can feed into broader inflation and financial markets; the price shock has already dented US stocks, raised gasoline prices and boosted market odds that the Federal Reserve will raise interest rates at its upcoming meeting.
Key Facts
- Brent crude price: $105.26 a barrel (up $4.05, or about 4%) at 1215 GMT on Thursday
- West Texas Intermediate (WTI): $100.04 a barrel (up $3.99, or about 4.15%)
- Price move since August: Brent has climbed more than 30% from early-August lows
- Shipping developments: Iran-aligned Houthis seized Yemen's port of Mocha; tanker attacks have intensified near the Strait of Hormuz
- Iran-US naval actions: Iran said it attacked 10 ships after the US struck five Iranian oil tankers; Iran's IRGC warned it would escalate if further attacks occur
Oil benchmarks jumped about 4% on Thursday as a fresh wave of attacks on tankers heightened concern about possible disruptions to seaborne crude flows. Brent rose above $105 a barrel and US crude topped $100, marking the first time WTI has cleared that level since May. The move comes amid what traders described as the largest escalation in attacks on shipping since the current US-Iran conflict intensified. The security picture in and around key shipping lanes has deteriorated: Iran-aligned Houthi forces took control of Yemen’s port of Mocha, and tanker strikes have been concentrated near the Strait of Hormuz, a vital conduit for Gulf exports. Tehran said it had attacked 10 ships after US strikes on five Iranian oil tankers, and the Islamic Revolutionary Guard Corps warned it would respond more forcefully to any future assaults. Market participants said these developments make sustained supply worries more likely. Analysts also pointed to resurgent Chinese buying as a factor tightening physical crude markets. Traders and analysts at ING and ICIS noted that China, the world’s largest crude importer, has stepped up purchases after a period of weak demand; continued Chinese imports would amplify the effect of any Gulf supply losses, while a slowdown in those purchases could ease pressure on prices. PVM analyst John Evans said the market is pricing in a longer-lasting conflict than was expected a month ago, keeping the oil balance tight. The jump in oil has already rippled through financial markets and the consumer economy. Higher fuel costs have pushed the US average price for a gallon of regular petrol to about $4.28, according to the American Automobile Association, and the rise in energy prices has fed inflation worries that weighed on equities — the S&P 500 fell roughly 0.6% and looked headed for a fourth straight decline. Traders moved to price in a higher chance of a US interest-rate increase at the Federal Reserve’s meeting next week, with CME Group data showing the implied probability rising to nearly 70% from 61% the day before, despite public pressure from President Donald Trump for lower rates.
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Original source: Al Jazeera