US and Israel launch attacks on Iran, causing oil price surge

US Oil Prices Rise Amid Supply Concerns in Middle East

Oil prices have increased sharply, with Brent crude up by 9% to $79.41 per barrel, according to data from FactSet. This follows a rise of 8.6% for West Texas intermediate oil, which is now trading at $72.79 per barrel.

The increase in oil prices is attributed to supply concerns in the Middle East, particularly in Iran and the Strait of Hormuz, a vital waterway that accounts for about a fifth of global seaborne oil trade. The US and Israeli military strikes on Iran have been met with retaliatory missile barrages from Iran, which has raised concerns about the potential disruption to oil supplies.

The US President Donald Trump stated that attacks would continue until US objectives were met, suggesting that the supply of oil from Iran and elsewhere in the Middle East may slow or grind to a halt. Traders are betting on this scenario, with tankers traveling through the Strait of Hormuz piling up on either side of the strait due to concerns about attack or inability to secure insurance for the voyage.

The Organization of the Petroleum Exporting Countries (OPEC+) has announced that it will increase production by 206,000 barrels per day in April, which is more than analysts had expected. However, this may not be enough to offset the potential disruption to oil supplies from Iran and other Middle Eastern countries.

Global energy prices are likely to rise further, affecting consumers who will pay more for petrol at the pump and have to shell out more for groceries and other goods. The impact of inflation is already being felt by many, and this could exacerbate the situation.

In related news, eight countries that are part of OPEC+ announced their decision to boost production on Sunday. Japan’s Nikkei stock index fell 1.3% on Monday, while China’s Blue-chip stocks were off just 0.1%. The US dollar has benefited from the oil shock, as the country is a net energy exporter.

Source: Al Jazeera