Oil Tops $100 as Iran Attacks Offset Record Reserve ReleaseConflict Shows No Signs of Ending

Oil prices have surged back above $100 a barrel as Iran’s fresh attempts to hit supplies in the Middle East overshadowed a record release of strategic crude by the International Energy Agency (IEA).

The US-Israel strikes on the Islamic Republic are now entering their third weekand the conflict shows no signs of letting up.

The Oil Shock

Brent crude jumped more than nine percent to hit $101.59 a barrel. WTI spiked at just short of $96.

This despite the IEA announcing on Wednesday that its members had agreed to unlock 400 million barrels of oil from their reservestheir largest release everwith 172 million coming from the United States.

The move was unable to overcome fears about the choking of energy supplies from the Middle East, with the Strait of Hormuzthrough which a fifth of global crude passeseffectively shut down.

The Attacks

As Iran steps up attempts to disrupt supplies across the region:

• Two tankers in Iraqi waters were reported struck on Thursday

• Bahrain reported an attack on fuel tanks in the country

• Saudi Arabia intercepted drones headed to the Shaybah oil field

• Kuwait intercepted several drones, with state media reporting a fire in a residential building and two injuries

Iraq, Kuwait, and Saudi Arabia have all cut output because of the crisis.

The Warning

Iran said it was ready for a long war of attrition that would “destroy” the world economy.

The Revolutionary Guards warned they would strike “economic centres and banks” linked to US and Israeli interests.

“The United States and Israel must consider the possibility that they will be engaged in a long-term war of attrition that will destroy the entire American economy and the world economy,” said Ali Fadavi, an adviser to the Guards’ commander-in-chief.

The Impact

A prolonged disruption to shipping through the Strait of Hormuz would deliver a severe economic shock, particularly in Asia and Europe.

Airlines are among those badly hit. Air New Zealand announced it would cut 1,100 flights over the next two months.

The surge in oil prices has fanned fresh fears about another spike in inflation and warnings that central banks might have to hike interest rates againhaving been contemplating cuts just last month.

The Latest Developments

• Bahrain: Fuel tanks attacked in Muharraq Governorate; residents told to stay home

• Saudi Arabia: Two drones intercepted heading to Shaybah oil field

• Iraq: Two oil tankers attacked off the coast; at least one crew member killed, several missing

• Lebanon: Death toll above 630; more than 800,000 registered as displaced

• Israel: New wave of missiles heading for Israel; “wide-scale” strikes on Tehran and Beirut

• UN Security Council: Adopts resolution calling for Iran to halt attacks on Gulf states (13-0; China and Russia abstain)

The Bottom Line

$100 oil. A strait shut down. Tankers struck. Drones intercepted. And a war that keeps escalating.

The IEA released record reserves. It wasn’t enough.

Analysts warn that $90-$100 could be the new normaland if the conflict widens, even that might not hold.

{Source: IOL}

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