Benchmark Brent crude futures rose above $100 a barrel on Wednesday, breaking the symbolic threshold for the first time since July 24 as escalating conflict in the Middle East heightened concerns over oil supplies from the region.
Brent crude futures gained $2.15, or 2.2%, to $100.07 a barrel by 0721 GMT, while US West Texas Intermediate (WTI) crude rose $1.70, or 1.83%, to $94.73 a barrel.
Brent has climbed by about a quarter since early last month as hopes for a permanent resolution to the six-month-old US-Iran conflict have faded.
With the conflict now entering its seventh month and showing little sign of easing despite White House claims that a deal could be imminent, investors are increasingly concerned that prolonged higher oil prices could reignite inflation and complicate the Federal Reserve’s interest-rate policy.
The two sides remain locked in a stalemate, with Tehran maintaining control over the Strait of Hormuz, a critical shipping route for global oil and gas supplies, while Washington continues efforts to squeeze Iran’s ports and economy.
Iran said on Wednesday that it had struck a US military base in Jordan following American attacks on Iranian vessels in the Strait of Hormuz. The US attacks came in response to ballistic missile launches targeting an American warship.
Tehran also threatened to target oil tankers off Kuwait and Bahrain and urged crews to leave their vessels, according to Iran’s state news agency IRNA.
The latest escalation followed exchanges of strikes between Saudi Arabia and Iran-backed Houthi forces in Yemen. The Houthis targeted oil facilities as part of an offensive towards the Bab al-Mandab chokepoint in the Red Sea.
The waterway has become increasingly important for Saudi oil shipments since the Strait of Hormuz was shut.
Both major crude benchmarks gained more than 1% on Wednesday. Brent climbed as high as $99.68 before crossing the $100 mark, while WTI moved towards $95, a level it has not reached since June.
The surge in energy prices has kept inflation elevated in many economies and increased pressure on central banks to maintain or raise borrowing costs. The European Central Bank is widely expected to raise rates on Thursday.
Investors are also focused on the release of US consumer price index data on Friday, which could influence expectations for the Federal Reserve’s next interest-rate decision.
“The continuing conflict in the Middle East is keeping concerns over supply disruptions, and that in turn is worrying investors about the inflationary consequences of elevated oil prices,” said Fawad Razaqzada, a market analyst at FOREX.com.
“For the Fed, the combination of resilient US employment and renewed pressure from energy prices are both hawkish signals.
“A sustained rise in oil prices would risk reversing the progress on inflation that policymakers have been relying on to justify lower interest rates, while simultaneously squeezing consumers and businesses.”
The prospect of higher borrowing costs weighed on global equities, with all three major US stock indexes falling on Wall Street.
Asian markets were mixed, although technology stocks continued to recover from July’s sell-off as renewed enthusiasm over artificial intelligence supported the sector.
Seoul led regional gains, with chipmaker SK hynix rising more than 3%. Shanghai, Wellington, Taipei, Bangkok and Manila also advanced, while Hong Kong, Tokyo, Sydney, Singapore, Mumbai and Jakarta declined.
London, Frankfurt and Paris fell at the open.
In currency markets, the yen strengthened to around 152.95 per dollar after Tuesday’s rally, although some of those gains were later pared.
Key figures at around 0715 GMT
West Texas Intermediate: UP 1.4% at $94.37 per barrel
Brent North Sea Crude: UP 1.6% at $99.49 per barrel
Tokyo – Nikkei 225: DOWN 0.2% at 65,142.78
Hong Kong – Hang Seng Index: DOWN 0.3% at 25,232.38
Shanghai – Composite: UP 0.3% at 3,951.51
London – FTSE 100: DOWN 0.3% at 10,775.68
Dollar/yen: DOWN at 153.30 yen from 153.96 yen on Tuesday
Euro/dollar: UP at $1.1639 from $1.1627
Pound/dollar: UP at $1.3559 from $1.3541
Euro/pound: DOWN at 85.84 pence from 85.85 pence
New York – Dow: DOWN 1.2% at 52,786.07
AFP
