Oil prices, specifically Brent crude futures, crossed the $100 per barrel mark, reaching $100.70, a 7% increase. U.S. West Texas Intermediate (WTI) crude also rose by about 6% to $92.25 per barrel. This surge follows a more than 30% increase this month, primarily due to heightened conflict in the Middle East, including reports of attacks on tankers in the Red Sea and President Donald Trump's threats of a "massive attack" against Iran. The Houthis in Yemen claimed responsibility for targeting two Saudi oil tankers for violating a maritime blockade. These events combined to push oil to a six-week high.
Analyst projections suggest further increases in oil prices. Helima Croft, global head of commodity strategy at RBC Capital Markets, warned that Brent could exceed its 2022 high of $128 per barrel, and even surpass the 2008 peak of $146 per barrel in a worst-case scenario of full-scale regional war. Goldman Sachs anticipates Brent could exceed $120 per barrel in the fourth quarter and average $100 next year if the Strait of Hormuz remains disrupted. These forecasts are underpinned by concerns over supply interruptions in critical chokepoints like the Red Sea, the Strait of Hormuz, and the Bab el-Mandeb strait.
The rise in oil prices had a notable impact on U.S. markets. Wall Street's major averages declined, with stocks sliding as investors also processed quarterly results from tech giants like Tesla and Alphabet. The S&P 500, Nasdaq, and Dow Jones Industrial Average were affected. The escalation of energy prices is also putting pressure on households, with the average 30-year mortgage rate at its highest in almost a year and gas prices back above $4 a gallon, indicating that the pressure on spending power is intensifying.
Adding to supply concerns, the Ukraine-Russia war continues to impact global oil markets. Ukraine has reportedly attacked over 150 tankers in the Black Sea and Sea of Azov this month, leading to the Caspian Pipeline Corporation suspending crude loading at its Black Sea terminal. This pipeline is crucial, as it exports about 80% of Kazakhstan's crude. The duration of this closure is uncertain, and alternate routes for Kazakhstan are limited, potentially resulting in production shut-ins of 1.7 million barrels per day (mb/d).
