'With the Strait of Hormuz still largely being avoided, storage facilities are filling up fast,' Deutsche Bank analysts warned. - Credit: iStock
Ongoing uncertainty amid conflict in the Middle East has caused the price of oil to surge above the $100-a-barrel threshold for the first time since 2022.
Brent crude, the global benchmark, surged to $119.50 earlier today (9 March), according to data from MarketWatch. At the time of reporting, crude had dropped to around $107.50 per barrel, a rise of 16% from Friday's (6 March) close.
Oil prices surge as US-Iran conflict intensifies
West Texas Intermediate, the US benchmark, was trading at $103.81 at the time of reporting, a rise of 14.2%.
US President Donald Trump took to Truth Social to attempt to quell concerns about the rising prices. He said: "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 USA, and World, Safety and Peace. Only fools would think differently!"
In an international meeting today, G7 finance ministers will discuss methods to tackle the surging oil prices, including a possible joint release of petroleum from reserves coordinated by the International Energy Agency, according to a report from the Financial Times.
Three G7 countries, including the US, have expressed support for the idea so far, people familiar with the talks told the FT.
Concern about the future of oil production rose over the weekend after the UAE and Kuwait joined Iraq in reducing oil output.
"With the Strait of Hormuz still largely being avoided, storage facilities are filling up fast. And this morning's surge adds to what were already big moves last week" said Deutsche Bank analysts.
"Crude prices shot up by more than a quarter as trading got underway on oil markets. It has been the biggest jump since the outbreak of the pandemic, and investors are bracing for an inflation crisis," said Susannah Streeter, chief investment strategist at Wealth Club.
She continued: "The oil market is clearly under distress as the key Strait of Hormuz, through which a quarter of crude supplies are usually transported, is impassable, facilities have come under attack, and big producers have cut production."
Investors told 'hold your nerve' as Iran strikes spur volatility
Should the situation in the Middle East worsen, Streeter warned it has the potential to cause a "toxic combination of shocks" for economies.
"Inflation is set to rise sharply, given the spike in energy prices, which may lead central banks to keep interest rates higher for longer. Higher energy prices and borrowing costs will be a drag on growth, and the concern is that governments lack the financial firepower, given high debt levels, to deliver meaningful support to companies and consumers," she explained.
