Oil surged past $100 a barrel for the first time in two months after Iran-backed Houthi militants said they attacked two Saudi Arabian tankers in the Red Sea, opening a new front in the Middle East conflict and threatening deeper supply disruptions.
The reflaring of the Iran war is already snarling traffic through the Strait of Hormuz, the gateway to the Persian Gulf. Targeting the Red Sea imperils the critical detour route that the Saudis used to keep oil barrels flowing amid the Hormuz disruptions.
The market is also contending with a spate of attacks at the Caspian Pipeline Consortium terminal on Russia’s Black Sea coast, which exports most of Kazakhstan’s crude. Inventories across the globe are depleted by months of conflict, raising the risk of a supply squeeze that threatens to weigh on the global economy if prices continue to climb.
“Round 2 of the military conflict is going to be broader than Round 1,” Bob McNally, president of Rapidan Energy Group and a former White House official, said in a Bloomberg Television interview, referring to the Iran war. “The risks are great, not only to shipping, but also to energy infrastructure.”
Real-world oil prices also strengthened alongside headline futures prices. Dated Brent, the world’s most important physical price, surged above $105 a barrel for the first time since late May. Price differentials for cargoes in the North Sea also increased.
Brent futures’ ascent above $100 marks a key psychological threshold at which oil market participants say political pressure on US President Donald Trump to end the war and rein in soaring energy costs intensifies. With retail diesel prices over $5 a gallon and gasoline over $4, the additional surge risks creating further pain for businesses and consumers alike.
“If we see oil prices in this $90 to $120 range by the end of the summer, that’s where we probably see more impact on consumer spending,” said Rob Haworth, senior investment strategy director at US Bank Wealth Management. “Wage growth isn’t keeping up with that.”
Trump, meanwhile, made fresh threats to step up strikes on Iran, telling Axios in an interview that he’s considering a “massive attack” that would be “bigger than ever before” and he’s “close to making a decision” on it.