The price of oil is up massively following the U.S. and Israel’s strikes on Iran, which have left its supreme leader, at least four U.S. service members and over 200 Iranian civilians (including at least 153 children and people at an all-girls school that was struck by three missiles) dead. As of 9:30 a.m., U.S. crude oil was up more than 8.5% in the past week, while Brent — the international benchmark, was up more than 10.5% in the same timeframe.
Even before Trump’s and Bibi’s decision to strike Iran, oil prices had already risen 17% this year as the President ramped up rhetoric against the regime. He also ratcheted up sanctions on Iran in recent months.
Sure, Iran’s oil production accounts for less than 5% of global output. The issues arise when you consider the fact (which the Trump administration clearly didn’t) that it has a major influence over the Strait of Hormuz — a critical waterway for over 20% of the world’s daily oil demand. From NBC News:
A closure or restriction there can quickly rock the global oil market, and it would be among the worst-case scenarios for the oil market, longtime industry analyst Andy Lipow said Sunday.
On Saturday and Sunday, at least six of the leading cargo shipping companies said they were halting or diverting ships that were originally set to sail through the key waterway.
“Historically, geopolitical oil shocks fade quickly, but if this episode lasts longer, markets may see extended volatility,” Luis Costa, Citigroup’s global head of emerging markets strategy, wrote in a note on Sunday night.
[…]
Retail gas prices move about 2.5 cents for every $1 move in the price of crude oil, so already a nearly [$15] cent-per-gallon increase could be on the horizon for consumers. Price hikes at the gas pump could start as soon as Monday, GasBuddy analyst Patrick De Haan said.
[…]
“I fully expect that by Monday night, you could credibly say that gas prices are being impacted by oil prices having gone up,” he said.
“It won’t be a spike,” De Haan said, but still warned that gas stations will likely start passing along price hikes this week.
From just a week ago, gas prices are already up quite sizably. Here’s a look at AAA’s current average prices related to where they were just one week ago:
Regular: $3.00 (+$.06) | Mid-Grade: $3.49 (+$.05) | Premium: $3.86 (+$.05) | Diesel: $3.770 (+$.09)
It’s clearly not just the U.S., either. European gas prices are up more than 50% since Qatar shut down its liquified natural gas production at the world’s largest export facility, according to Bloomberg. It follows targeted attacks by Iranian drones.
I’m not sure how or when this ends, but I know it’s going to cost everyone a lot of money, and somehow, that’s the least of our worries. I will say this, though: we warned you.
