NEW YORK: Oil prices rose more than 5 percent on Wednesday after Iran’s Revolutionary Guards threatened to attack several energy facilities across the Middle East in retaliation, heightening the risk of further disruptions to energy supplies in the region.
Brent futures rose USD5.26, or 5 percent to USD108.66 a barrel at 1105 a.m. ET (1505 GMT) on Wednesday, having risen to as high as USD109.95 earlier in the session, while US West Texas Intermediate crude gained USD2.44, or 2.54 percent, to USD98.65. WTI also hit its widest discount to Brent since May 2019 on fears of a protracted conflict.
Iran’s huge Pars gas field was hit on Wednesday in the first reported strikes on Iranian energy infrastructure in the Gulf during the US-Israeli war, a major escalation that prompted Tehran to warn its neighbours that their energy installations would be targeted “in the coming hours”.
READ MORE: Brent crude oil price jumps after attack on Iran’s South Pars field
“The attacks on Iran’s South Pars field were boosting oil and gas prices, and any further escalations of attacks to energy infrastructure would continue to raise prices”, SEB analyst Ole Hvalbye said.
The US-Israeli war on Iran and Tehran’s attacks on Gulf neighbours have disrupted oil and natural gas exports from the Middle East and forced production stoppages.
Fighting has halted shipments via the world’s most important oil artery, the Strait of Hormuz, which handles 20% of global oil and LNG supply. Total oil output cuts in the Middle East are estimated at 7 million to 10 million barrels per day or 7% to 10% of global demand.
To offer some relief to skyrocketing prices, the Trump administration announced on Wednesday a 60-day waiver of the Jones Act shipping law, temporarily allowing foreign-flagged vessels to move fuel, fertilizer and other goods between US ports as soaring energy and agricultural prices strain supply chains amid the ongoing conflict in and around Iran.
The United States also issued a general license authorizing certain deals involving Venezuela’s state oil company PDVSA, the US Treasury Department said on Wednesday.
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