Brent crude climbed past $100 a barrel for the first time since July after the US military destroyed Iranian tankers and Houthi forces struck Saudi cities. Goldman Sachs now says a jump above $120 a barrel is growing more plausible as shipping attacks intensify.
Brent crude, the international benchmark for oil, rose 2.1% past $100 a barrel on Wednesday, a level it had not touched since July. Futures for Brent added more than 2% to touch $100.01 a barrel around 3:20 a.m. ET. WTI futures for November delivery jumped 1.75% to $94.66 a barrel.
US strikes Iranian tankers after warship attack
The US military destroyed five Iranian crude tankers on Tuesday in retaliation for an attempted attack on an American warship. The warship evaded the strike and no American personnel were harmed, according to a Centcom statement cited by CNBC. The exchange came after Iran attempted to strike the warship with ballistic missiles, the Guardian reported.
Iran-backed Houthis had already struck four Saudi cities the previous night, wounding more than 70 people and setting oil installations ablaze. Oil has climbed by a quarter since early August as hopes for a lasting resolution faded and fighting flared again.
Goldman sees rising odds of $120 oil
Goldman Sachs co-head of global commodities research Daan Struyven said the risk of Brent exceeding $120 a barrel is climbing as shipping attacks intensify and broaden. According to CNBC: "It's definitely plausible", Struyven said when asked whether oil could reach $120 a barrel. Goldman's base case still assumes Gulf exports gradually recover as producers adapt through alternative shipping routes and additional pipeline capacity, but he said the odds of exports stagnating instead have risen.
US-Iran military action had paused for about a month while Washington leaned on economic pressure, before strikes resumed toward the end of last month.
Energy costs stoke inflation worries
Gas prices have risen alongside oil: UK natural gas prices hit their highest level in three and a half years this month. The rise in energy costs has stoked fears around inflation and the prospect of higher interest rates this year, with US economists expecting at least one Federal Reserve rate rise by year end, the Guardian reported.
Brent had already peaked at $126 in April during the conflict before falling back on ceasefire hopes, then climbed again once a US-Iran memorandum of understanding collapsed and hostilities resumed.
Sources: The Guardian, CNBC
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