Global oil prices hit $100 per barrel as Middle East conflict roils markets
By John Towfighi, CNN
New York (CNN) — Global oil prices are back at $100 per barrel, rising to their highest levels since July as fighting in the Middle East raises concerns about prolonged disruptions to oil supply.
Brent crude, the global oil benchmark, rose 2.3% early Wednesday to briefly trade at $100 per barrel for the first time since July, before falling back slightly. US crude oil were up 1.3% to hit $94 per barrel.
Brent hit $100 per barrel after a day of conflict and war developments that included the US striking Iranian oil tankers and earlier saw the Iran-backed Houthis attack Saudi Arabia.
Oil prices have been on a rollercoaster this year, oscillating as traders react to flare-ups in fighting and monitor oil tanker traffic through the Strait of Hormuz.
All told, Brent and US crude are each up more than 60% this year, raising the cost of energy across the globe.
The rise in oil prices has pushed up the price of oil products from gasoline to diesel, hitting consumers’ wallets and putting inflation in focus for central banks.
Back at $100 per barrel
Oil prices have climbed this month as conflict between the United States and Iran reignited. Tensions over the Strait of Hormuz are stoking concerns that oil tankers will continue to face obstacles trying to transit the key waterway.
The US struck four Iranian tankers in the Gulf of Oman and one near Kharg Island in response to attempted ballistic missile attacks on a US Navy warship, US Central Command said Tuesday. Kharg Island, located in the Persian Gulf, is a critical hub for Iran’s oil exports.
Oil prices initially jumped Tuesday after the Iran-backed Houthi rebels attacked Saudi Arabia, targeting oil and other infrastructure. Saudi-led forces vowed to respond, saying dozens of civilians had been injured. Oil prices pared some gains midday before resuming their climb in the afternoon.
The Yemen-based Houthis’ attacks on Saudi Arabia add to concerns that the Iran war is broadening out across the region, impacting more oil production, continuing to slow the global flow of oil and putting pressure on supply.
Higher prices at the pump
Brent’s return to $100 per barrel is emblematic of the ongoing uncertainty over the flow of oil and threats to refineries in the Middle East.
It’s also a sign that rising energy prices could persist. The surge in oil prices this year has been accompanied by a rise in gas and diesel prices, putting more pressure on consumers.
The average price of gasoline surged by 7.3 cents per gallon on Wednesday, the biggest one-day increase since May 1, according to AAA data.
US gas prices are now averaging $4.22 per gallon — the highest level since June 4. By comparison, gas prices were just $3.19 at this point last year and $2.98 before the war with Iran started.
Normally, gas prices cool off as Labor Day weekend marks the end of the high-demand summer driving season. However, this year Labor Day gas prices were the highest on record.
The US national average diesel price hit a record $5.94 a gallon on Wednesday, according to AAA data.
The closure of the Strait of Hormuz has also hampered the global supply of liquified natural gas, adding to higher energy prices across the globe.
“The combination of expensive diesel, jet fuel, bunker fuel and natural gas is particularly uncomfortable for consumers around the world, who see their disposable income shrinking,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a note.
Oil’s rollercoaster isn’t over
Brent first settled above $100 per barrel this year on March 12, then its highest level since 2022 when Russia invaded Ukraine.
After surging higher in April and May, Brent then tumbled and fell as low as $72 per barrel in June after the US and Iran said they reached an agreement to re-open the Strait of Hormuz.
But Brent resumed climbing as conflict persisted, topping $100 per barrel again in July before wavering and then hitting that mark again late Tuesday.
The price of oil has moved around as traders monitor traffic through the Strait of Hormuz and try to gauge whether the market is going to see bigger supply issues or not. The United States is trying to help oil tankers move through the strait while Tehran says it retains control.
“Traders will remain focused on how transportation volumes are moving out of the Middle East, as it now seems volumes can change very quickly,” Dennis Kissler, senior vice president of trading at BOK Financial, said in a note.
Fighting in recent months has spread to the Red Sea and the Bab al-Mandab Strait, complicating the outlook for the oil market. The Houthis have targeted the Bab al-Mandab Strait, a waterway off the coast of Yemen that connects the Red Sea to the Gulf of Aden. The Houthis’ attacks on Saudi oil infrastructure are also contributing to nerves that the region could face greater disruptions to oil production.
While disruptions to oil supply are in focus, analysts are also watching demand. China, the world’s largest oil importer, has helped keep a lid on oil prices by lowering its imports in recent months, analysts say. If imports pick up in China, it could push oil prices higher.
Markets on edge
The flare-up in tensions in the Middle East rattled the stock market: The S&P 500 fell 0.6% on Tuesday.
The S&P 500 is down less than 2% since hitting a record high in mid-August. Stocks continue to trade near record highs, but the market has taken a step lower over the past month as the rise in oil prices has put nerves about inflation and higher interest rates back in focus.
Central banks across the globe are expected to hold rates steady, or even raise rates, in response to the rise in energy prices sparked by the closure of the Strait of Hormuz.
Bond yields across the globe have surged in recent weeks as traders brace for central bank rate hikes and assess the inflationary impact of higher oil prices.
The stock market is entering a critical stretch where the combination of fighting in the Middle East and a series of central bank decisions will test investors’ resolve.
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CNN’s Zachary Cohen contributed reporting.
