Brent crude jumps above $117 for first time since April
All signs point to further military escalation in the Middle East in the near term, according to an RBC analyst / Photo: Vova Shevchuk / Shutterstock
Escalating conflict in the Middle East has reignited market concerns about threats to global supplies, Bloomberg reports. Brent crude jumped to an intraday high of $117.45 per barrel on Friday, its highest level since April, the Financial Times reports. Meanwhile, rising energy prices are pushing U.S. inflation expectations higher.
Brent contracts for December delivery were up more than 3% at their session high on Friday. December futures for U.S. benchmark West Texas Intermediate also surged to $103.30 per barrel, more than 3% above the last close.
Overall, oil prices have risen 20% since the start of September, according to the FT’s calculations. It attributes the rally to concerns that the U.S. and Israel could intensify attacks on Iran after November’s U.S. midterm elections, a prospect The New York Times reported on a day earlier. The jump in oil prices also reflects traders’ concerns about dwindling global inventories, the FT notes. This comes as Iran steps up attacks on tankers passing through the Strait of Hormuz. On Thursday, Iranian state television reported that at least seven oil tankers had been attacked or struck naval mines in the area.
“Oil continues to rise as the direction of travel points to near-term military escalation in the Middle East. ‘Over soon’ soundbites are no match for active missile fire,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, as quoted by the FT.
The U.S. also withdrew some diplomatic staff and their families from Saudi Arabia this week amid increasingly frequent attacks on the kingdom by the Iran-backed Houthis. This added to pressure on oil markets as investors worried that the Middle East conflict could spread to other countries in the region.
“Rising oil is taking the baton from credit concerns as the main threat to the equity rotation that has been keeping the S&P 500 afloat,” Bloomberg macro strategist Michael Ball said.
U.S. stocks fell on Friday as oil prices climbed: as of this writing, the S&P 500 is down 0.44%, the Nasdaq Composite is off 0.09%, and the blue-chip Dow Jones Industrial Average has given up 1.23%.
