Brent crude rose four percent to $105.26 a barrel on Thursday as intensifying attacks on oil shipping in the Middle East increased fears of supply disruptions. Traders raised the implied chance of a US Federal Reserve interest-rate increase at next week’s meeting to nearly 70 percent, from 61 percent the previous day.
Attacks put Red Sea and Gulf routes under pressure
Iran-aligned Houthis seized control of Yemen’s port of Mocha on Thursday, adding to threats to Red Sea traffic. Tanker movements through the Strait of Hormuz also remain restricted as attacks in the region have intensified. Read the context: Brent crude approaches $97 as Strait of Hormuz traffic falls.
Iran said it attacked 10 ships near the Strait of Hormuz on Wednesday after the United States hit five Iranian oil tankers. Iran’s Islamic Revolutionary Guard Corps said it would escalate its response to further attacks.
Key points
- West Texas Intermediate crude rose 4.15 percent to $100.04 a barrel, topping $100 for the first time since May.
- Brent has gained more than 30 percent from lows reached in early August.
- The average US price for regular petrol reached nearly $4.28 a gallon.
- The S&P 500 fell 0.6 percent and was on track for a fourth consecutive loss.
China’s purchases could influence the next move
Analysts at ING said China, the world’s largest crude importer, has increased purchases in recent weeks after months of subdued demand. Continued buying could amplify the effect of supply disruptions, while a pullback in imports could moderate price gains.
PVM analyst John Evans said the latest price increase showed traders expected the conflict to last longer than previously anticipated. He said reduced oil supply and exports would leave the market tight and prices elevated.
Higher oil prices add to inflation pressure
Rising crude prices have increased costs for US drivers and for goods transported by truck. They have also added to inflation concerns in financial markets, contributing to pressure on bonds and another decline in US stocks.
The prospect of a rate increase has risen despite President Donald Trump’s repeated calls for interest rates to move lower. Analysts said the durability of the oil rally will depend in part on whether China’s crude demand continues to recover.
What happens next
Traders will assess the Federal Reserve’s interest-rate decision at its meeting next week, while oil markets monitor further attacks and Chinese crude purchases.
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