Brent oil steadied near $101 a barrel as Iran vowed it was prepared for a more intense war after hostilities flared across the Middle East, stoking fears about deeper disruptions through the Strait of Hormuz.
The global benchmark jumped 3.4 per cent on Wednesday to close in triple figures for the first time since July. West Texas Intermediate traded above $96. Iran has no intention of backing down in the face of an American naval blockade and will escalate its strikes if the US continues attacking its territory, according to a senior official from the Islamic Republic.
Renewed fighting over the past week has ended a period of relative calm and driven oil and natural gas prices higher. US president Donald Trump said the war would only end after the November midterm elections and that significant gasoline price relief would not come before then, signalling little prospect of a near-term de-escalation in the conflict, now in its seventh month.
The US is trying to cripple Iran’s economy through a naval blockade that has slashed oil exports, alongside threats to penalise governments and companies that fail to sever ties with Tehran. The Iranian official acknowledged growing economic pain, but said the leadership believes it has little choice but to keep fighting until it is confident Washington will be too wary to attack again.
White House advisers, including vice president JD Vance, have privately raised with Trump the prospect that the war with Iran could drag on through the remainder of his term, the Wall Street Journal reported, citing US officials. Such a scenario would strain US military resources and heighten the risk of prolonged disruptions to Middle East energy supplies.
Fears of a lengthy conflict have helped drive energy prices higher. Brent is up almost 70 per cent this year, although the benchmark remains well below its wartime peak of $126 a barrel reached in April, in part due to some crude flowing out of the Persian Gulf. Refined products such as diesel have posted even steeper gains, reflecting supply risks from the Iran and Russia-Ukraine wars.
“Rising oil prices will be a concern ahead of the midterms,” said Warren Patterson, head of commodities strategy at ING Groep NV. “In order to see prices moving significantly higher, we would need to see recent escalation feeding through to renewed disruptions in oil flows through the Strait of Hormuz.”
A resurgence in Chinese buying has helped to tighten the global oil market, although the country’s smaller refiners are being squeezed by higher prices and may be forced to cut processing runs in the coming weeks, potentially curbing demand in the world’s biggest crude importer.
US energy secretary Chris Wright told Bloomberg that just under 11 million barrels a day of crude and oil products are moving through Hormuz. He also offered a more optimistic assessment than Trump on gasoline prices, saying they will move lower in the coming weeks as efforts to boost US refining capacity gather pace.
US retail gasoline prices hit a Labor Day record this week, posing one of the biggest political threats to Trump’s fellow Republicans ahead of the midterms. Diesel prices have also climbed to a record high, while US inventories of the industrial fuel are projected to fall this month to their lowest in more than two decades, according to the Energy Information Administration. – Bloomberg