Oil prices surpassed $100 a barrel for the first time since the early months of Russia’s invasion of Ukraine in 2022, with no signs of slowing in what has been the fastest oil rally since the 1980s.
Futures on international benchmark Brent crude (BZ=F) and US benchmark West Texas Intermediate crude (CL=F) rose more than 15% to cross $108 per barrel almost instantly after trading began at 6 pm ET on Sunday. Brent crude and WTI crude have gained more than 50% and 60%, respectively, since the conflict began.
US futures fell into the red as the session opened. S&P 500 (ES=F) and Nasdaq 100 (NQ=F) futures lost about 1.5%, while Dow Jones Industrial Average (YM=F) contracts lost another 2%.
Since the United States and Israel began airstrikes against Iran on February 28, killing Supreme Leader Ali Khamenei and fueling violent retaliation by the Iranian regime, oil prices have soared, recording their biggest weekly increase since at least 1985.
Crucially, the conflict has paralyzed oil tanker traffic through the Strait of Hormuz. About 20 million barrels of oil a day, or a fifth of the world’s maritime crude supply, cross the waterway connecting the Persian Gulf to the broader international market each day. Vortexa data shows that approximately 16 million bpd of oil has been stranded behind the strait and cut off from the global market.
Macquarie strategist Vikas Dwivedi wrote in a recent note to a client that “a few weeks of Hormuz closing will create a domino effect of events that could take crude oil to $150 or more.”
In the week since the US and Israeli airstrikes began, what began as a localized conflict focused on destroying Iran’s nuclear capabilities and potentially inciting regime change has expanded into a war that has engulfed the Middle East.
Airports, apartment buildings, military bases and other infrastructure in Saudi Arabia, the United Arab Emirates, Bahrain, Oman and many other countries have been targeted by missile and drone attacks by Iran. The skies over Iran darkened over the weekend after fuel depots near the cities of Tehran and Kharaj were hit by airstrikes.
The conflict has also increasingly turned on energy infrastructure across the region, further threatening a supply chain that has already been pushed to the limit.
Bahrain’s Bapco Energies refinery has been attacked; Saudi Arabia’s Ras Tanura refinery has been taken offline; and Qatar’s Ras Laffan LNG complex has declared force majeure. Oil tankers in the Persian Gulf have been hit by missiles and drones, and Iran’s Revolutionary Guard has threatened violence against any ship attempting to cross the Strait, even as they declare the passage nominally “open.”