Trumps Demand for Irans Surrender Drives Oil Prices to Five-Month High
Oil prices have surged to their highest level in almost five months, fueled by speculation that the US is on the verge of joining Israel’s attack on Iran. This uncertainty has kept the market on edge about potential crude supply disruptions in the Middle East.
West Texas Intermediate (WTI) crude oil rallied 4.3% to settle near $75 a barrel, the highest closing price since January. Prices swung between gains and losses early in the session, with uncertainty driving a gauge of crude market volatility to three-year highs.
President Donald Trump met with his national security team in Washington on Tuesday to discuss the escalating Middle East conflict. Before gathering his advisers in the White House Situation Room, Trump posted a demand for Iran’s “UNCONDITIONAL SURRENDER” in a social media post and warned of a possible strike against the country’s leader, Ayatollah Ali Khamenei.
Earlier, Trump played down the prospect of a ceasefire between Israel and Iran and said he wants “a real end” to the conflict. So far, Iran’s crude-exporting infrastructure has been spared, and most of the fallout has been confined to shipping. The market remains focused on any sign that Tehran may seek to disrupt crude flows across the Strait of Hormuz, through which about a fifth of the world’s daily output passes.
Elevated options trading indicates that “investors are still positioning for potential price spikes this month as tensions persist,” said Razan Hilal, market analyst at Forex.com. An incident in which two oil tankers collided near the waterway was a reminder of the risks to energy flows in the region. Navigation signals in the Strait of Hormuz and the Persian Gulf are facing increasing interference that’s affecting positional reporting, according to the UK Navy, and some shipowners are reluctant to accept bookings in the region, citing safety concerns.
Despite a blaze spotted in waters near the area on Tuesday that was not security related, according to a maritime risk firm, oil prices remain significantly higher than where they were before the attacks began. This prompted record volumes of producer hedging as well as futures and options changing hands. Morgan Stanley has hiked its price forecasts, citing increased risk from the conflict.
Israel said it has taken control over much of Iran’s airspace and severely damaged key facilities used in its missile and nuclear programs since the assault was launched on Friday, sparking fears of widening conflict in a region that produces around a third of the world’s crude.
