Rising US-Iran tensions have already caused unprecedented disruptions to oil markets/iStock
Oil extended its price surge as the fallout between the US and Iran escalated after the assassination of one of the country’s army generals, reported Bloomberg.
Futures jumped above $70 a barrel in London as the US State Department said there is ‘heightened risk’ of attacks near energy facilities in Saudi Arabia. Oil prices have risen by around $4 a barrel since the airstrikes.
The US State Department said that there is a risk of attacks particularly in the eastern province of Saudi Arabia close to oil and gas facilities. In response to the killing of its top military commander, Iran’s government said it will no longer abide by any limits on its enrichment of uranium, while Iraq’s parliament voted to expel US troops from the nation.
President Donald Trump said that he was prepared to strike ‘in a disproportionate manner’ and attack more than 50 Iranian sites if Tehran retaliates against the killing of Soleimani, while the Middle East nation is intensifying its intentions to strike back.
Vandana Hari, the founder of Vanda Insights in Singapore, said, “The US and Iran traded sequentially bigger threats over the weekend and Tehran has pulled out of the 2015 nuclear deal, marking a quick downward spiral in what could turn out to be the worst crisis in the Middle East since the Arab Spring.”
Brent for March settlement jumped as much as 2.2 per cent to $70.11 on ICE Futures Europe and was at $70.04 in Singapore.
Iraq is the second-largest producer in the Organisation of Petroleum Exporting Countries, pumping 4.65 million barrels a day last month. Its immediate neighbours in the region—Saudi Arabia, Kuwait and Iran—together produce about 15 million barrels a day.
Most of their exports leave the Arabian Gulf through the Strait of Hormuz, a narrow waterway that Iran has repeatedly threatened to shut down if there is a war.
Beyond crude’s rise, there were other signals in the market that people were preparing for further disruption.
Volatility rose to its highest level in a month and the cost of derivatives that insure against price spikes increased. Four million barrels of options contracts that would profit from a jump in Brent crude to $95 a barrel traded for both March and September.
Additionally, the cost of insuring tankers could rise again, after it surged in the wake of the Abqaiq attack in September 2019.
MOST READ
CPI Financial was established in Dubai in 1999 to meet the needs of an ever-expanding financial community, offering a comprehensive portfolio of market-leading products and services tailor-made for the banking and financial services sectors.
Loading More post
