Oil prices jump on fresh fears of escalation in Iran war
By Hanna Ziady, CNN
London (CNN) — Oil prices climbed and stocks slipped Thursday, after inflammatory remarks by US President Donald Trump and Iranian officials sparked fears that the conflict could still escalate significantly.
Brent crude, the global oil benchmark, rose 7.4% in early trade to more than $108 a barrel. WTI, the US benchmark, climbed 7% to $107 a barrel.
Stock markets fell, after gains earlier in the week. South Korea’s Kospi led declines in Asia, closing 4.5% lower. In Europe, major indexes were overwhelmingly in the red and US futures also pointed to a lower open.
Market sentiment “deteriorated overnight,” following the televised address by Trump, which delivered no clarity “on potential timelines or conditions for ending hostilities against Iran,” Deutsche Bank analysts wrote in a note. “There was no signal of the US seeking an imminent offramp out of the war,” they added.
Speaking from the White House Wednesday, Trump at once said that the war against Iran was “nearing completion” and that the United States would “hit Iran extremely hard over the next two to three weeks.”
In response, Tehran threatened to retaliate with “more extensive and destructive actions.”
Trump also renewed his threat to bomb Iran’s power plants if Tehran didn’t agree to US demands and signaled he was willing to end the war without restoring shipping through the Strait of Hormuz. That job, he said, should fall to countries that “desperately depend” on the oil that ordinarily flows through the waterway.
“The United States imports almost no oil through the Hormuz strait and won’t be taking any in the future. We don’t need it,” he said. “And in any event, when this conflict is over, the strait will open up naturally.”
For context, while it’s true that the United States, the world’s largest oil producer, is more insulated from the oil supply disruption than Asia and Europe, it still imports certain types of oil. Moreover, the prices for different grades of crude oil are set in a global market, and so the United States remains exposed to moves in global oil prices.
Even once the war ends, it will take time for oil tankers to make a full return to the Strait of Hormuz.
“Flows can begin to resume within days after the end of hostilities, but returning toward around 20 million barrels per day is likely to take several weeks,” Claudio Galimberti, chief economist at consultancy Rystad, wrote in a note Thursday. He pointed out that the resumption of shipping also depends on security assurances and insurance coverage.
Meanwhile, in the Middle East, the conflict rages on. Iran fired missiles at Israel early on Thursday, and Abu Dhabi said it had successfully intercepted a missile near an industrial hub. The US embassy in Iraq warned that Iran-aligned militant groups might conduct attacks in central Baghdad in the next 24-48 hours, urging Americans to leave the country.
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