Crude Oil Price: Crude oil prices rose again after the attack on a cargo ship in the Strait of Hormuz, leading to inflation and borrowing costs around the world. Brent rose almost 7% to cross $98.
The IEA’s decision to release a record 400 million barrels of oil from its emergency reserve provided no relief. US crude oil rose 7.5% to $93.80 a barrel, adding to gains of more than 4% overnight. Brent crude futures rose 7.7% to $99.03 a barrel.
This came despite the International Energy Agency’s plan to release 400 million barrels of oil from its reserves, the largest such move in its history. The US said it will release 172 million barrels of oil from next week as part of the IEA plan. Iraqi security officials said Thursday morning that two fuel tankers in Iraqi waters were attacked by Iranian boats laden with explosives, while an Iraqi official told state media that oil ports “have completely shut down.”
Tony Sycamore, an analyst at IG, said, “Several tankers carrying Iraqi crude oil are now reported to be ablaze in the Persian Gulf off the coast of Basra, engulfed in flames and burning oil leaking into the water. This appears to be Iran’s direct and forceful response to the IEA’s overnight announcement calling for a massive release of strategic reserves to curb spiraling prices.”
Iran had earlier stepped up attacks on merchant ships in the Strait of Hormuz, and told the world to prepare for $200 per barrel oil prices. On Wednesday, three ships were reported hit in Gulf waters, as Iran’s Revolutionary Guards said their forces fired on ships in the Gulf that did not obey their orders.
US President Donald Trump declared on Wednesday that the war against Iran has been won but that he will remain in the fight to finish the job, creating further uncertainty. This was all bad for stocks. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8%, while the Nikkei fell 1.6%, as Japan is a big importer of oil and gas.
inflation risk
US data showed the consumer price index rose 0.3% in February, which was in line with estimates and better than January’s 0.2% rise. However, the Iran war has increased inflation, making it modest. In the bond market, rising inflation risks have pushed yields higher across the world, drawing more attention to safe-haven sentiment. Yields on 10-year Treasury notes rose 4 basis points to 4.2472% on Thursday, having risen 6 bps overnight.
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