Washington: Oil prices surged past $100 a barrel as the conflict involving Iran disrupted energy flows through the Strait of Hormuz and rattled global markets.
US President Donald Trump defended the spike. He said higher oil prices were a temporary cost tied to confronting Iran’s nuclear threat.
“Short-term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A. and World, Safety and Peace,” Trump wrote on Truth Social.
“ONLY FOOLS WOULD THINK DIFFERENTLY!”
Crude oil prices almost touched $110 per barrel after major Middle East producers reduced output while the Strait of Hormuz remained effectively closed due to the Iran conflict, CNBC reported Sunday.
West Texas Intermediate crude jumped about 20.75 per cent, or $18.83, to $109.75 per barrel. Brent crude rose more than 18 per cent to about $109.48 per barrel, according to the report.
The jump marks one of the biggest weekly gains in oil futures trading since the early 1980s, it said.
The rally reflects fears that the Strait of Hormuz could remain disrupted. The narrow waterway is one of the world’s most critical oil routes. A large share of global oil and liquefied natural gas shipments moves through the Strait.
The Wall Street Journal reported that tanker traffic through the Strait slowed sharply as ships avoided the region after threats and attacks linked to the conflict.
Gulf producers have begun cutting output. Storage tanks are filling up. Without export routes, some producers are shutting wells or slowing production.
Financial markets reacted quickly.
Stocks in Asia dropped sharply when trading opened. Japan’s benchmark index fell about five per cent. South Korea’s market dropped more than seven per cent, The New York Times reported. Both economies depend heavily on imported oil and gas.
Analysts warn that prices could rise further if the conflict drags on. Market forecasts cited by financial trackers suggest crude could reach $143 per barrel by the end of the year.
Energy historian Daniel Yergin told The Wall Street Journal the situation could become “by far the biggest disruption in world history in terms of daily oil production.”
The conflict is also disrupting global trade routes. The Washington Post reported that missile and drone attacks in the region have slowed commercial shipping and damaged trade corridors between Asia, Europe and the Middle East.
Economists say Asia and Europe could face stronger economic pressure than the United States. Both regions rely heavily on imported energy moving through the Persian Gulf.
The United States may be somewhat protected because of its large domestic oil production and growing energy exports. Still, higher global oil prices can affect American consumers. Rising fuel costs often lead to higher transport and food prices.
Oil shocks in the Persian Gulf have triggered major economic crises before. The 1973 Arab oil embargo and the 1979 Iranian revolution both caused dramatic price spikes and global recessions.
