Brent crude jumped to its highest closing price since May as fighting between the U.S. and Iran escalated in the Persian Gulf. The U.S. military destroyed five Iranian tankers, and Goldman Sachs says a run toward $120 a barrel is now more plausible if shipping attacks keep intensifying.
Crude oil prices jumped more than 3% on Wednesday as fighting between the U.S. and Iran escalated in the Persian Gulf, raising investors' fears that energy exports through the Strait of Hormuz will fall. Brent futures gained 3.4% to $101.21 a barrel, the international benchmark's highest closing price since May 22. U.S. West Texas Intermediate futures advanced 3.3% to settle at $96.05.
US destroys Iranian tankers in retaliation
The U.S. military destroyed five Iranian crude oil tankers on Tuesday in retaliation for attempted attacks on an American warship. The warship evaded the Iranian attack, and no American personnel were harmed, U.S. Central Command said.
The escalation comes after the U.S. and Iran largely refrained from fighting for about a month following an outburst of violence in July. Washington had pivoted to applying economic pressure on Tehran instead, but fighting erupted again as Iran continued to attack commercial traffic in and around Hormuz.
Goldman Sachs flags a run toward $120
The conflict is now in its seventh month. Daan Struyven, co-head of global commodities research at Goldman Sachs, said the latest escalation raises the risk of Brent oil surging above $120 a barrel as attacks on shipping intensify.
Goldman's base case still calls for Persian Gulf exports to gradually recover as producers adapt through alternative shipping routes and eventually additional pipeline capacity. But Struyven said the recent escalation has increased the chances of a more bullish scenario, in which exports fail to recover in the coming months because of continued attacks on tankers.
Source: CNBC
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