Oil prices have climbed back above $100 a barrel for the first time since July as attacks on energy facilities and shipping in the Middle East put further pressure on already strained global supplies.
Brent crude, the international benchmark, rose by almost 3% to $100.72 early on Wednesday. US crude also increased, gaining 2.4% to $95.25 a barrel.
The latest surge has been accompanied by sharp increases in fuel costs in the United States. The average price of regular petrol rose by seven cents overnight to $4.22 a US gallon, according to the motoring organisation AAA — more than $1 higher than at the same point last year.
Diesel, widely used in freight, agriculture and industrial production, reached a record $5.94 a gallon overnight. The price is now nine cents higher than it was on Friday.
Jet fuel costs have also risen sharply, prompting airlines in the US and elsewhere to cut flights while increasing fares and additional charges.
The market reaction followed a series of military developments. The US military said it had destroyed five Iranian oil tankers after attacks on an American warship, while Iranian-backed Houthi fighters launched strikes against oil facilities and utilities in southern Saudi Arabia.
The Houthi attacks wounded 73 people and started fires at several facilities, Saudi Arabia’s Energy Ministry said. Operations at the affected sites were temporarily suspended, while the region includes the Jazan refinery, which has capacity to process about 400,000 barrels of crude a day.
The strikes also targeted an alternative route used by Saudi Arabia to move oil to international markets. The route passes through the Bab el-Mandeb, the strategic waterway linking the Red Sea with the Gulf of Aden, after much shipping through the Strait of Hormuz was disrupted by the conflict.
Five Iranian tankers were destroyed on Tuesday, according to the US military. The vessels were identified as the Kivik, Charminar, Horizon 1, Riesco and Derya, and the crews were warned to abandon ship before the attacks.
Iran subsequently launched missiles towards US targets in Jordan, according to Iranian state media. Jordan’s military said its air defences intercepted 18 ballistic missiles and that two others fell in uninhabited areas, with no casualties reported.
Strait of Hormuz disruption keeps oil markets on edge
Oil prices have been volatile since Israel and the US began their war with Iran more than six months ago. The fighting has halted most shipping through the Strait of Hormuz, through which about one-fifth of the world’s oil supply passed before the conflict.
Brent traded between roughly $70 and $100 a barrel during much of March, April and May. In July, it moved between about $72 and $102 as hopes rose and fell that Washington and Tehran could reach an agreement allowing stranded tankers to leave the Persian Gulf safely.
Talks over a preliminary deal have broken down over control of the waterway. Iran says it has the right to determine the terms and charge fees for ships passing off its coast, while the US insists that the strait should remain open to all shipping and has imposed a naval blockade on Iranian ports and tankers.
Bank of America analysts said a lasting agreement before the US midterm elections was becoming increasingly unlikely. The bank raised its forecast for oil prices in the second half of the year to $83 a barrel, citing more persistent disruption in the strait.
The analysts said prices could rise to between $95 and $120 a barrel if attacks continued to restrict shipping. Damage to major energy infrastructure could push prices as high as $150 a barrel, they added.
Refinery outages in Russia, lower refining activity elsewhere and declining inventories have added to the pressure on petrol and diesel markets worldwide. The resulting increase in energy costs is weighing on households, companies and national economies, particularly outside the US.
The price rises are also creating a political challenge for the US administration, with the country’s midterm elections eight weeks away.
