Benchmark oil prices surged past $90 per barrel for the first time in five weeks on Monday as the United States entered its ninth consecutive day of airstrikes against Iran, with no clear path toward de-escalation and the Strait of Hormuz remaining effectively closed to normal traffic. Futures on Brent crude, the international benchmark, rose as much as 3.8% Monday morning to briefly cross $91 per barrel before pulling back to around $88. Contracts on US benchmark WTI crude rose roughly 3% to cross $84 before retreating to approximately $81 a barrel, according to Yahoo Finance.
The US military launched a fresh round of airstrikes targeting Iranian military and communications infrastructure, per US CENTCOM, while Iran continued its own offensive against American military installations across Gulf nations including Kuwait, Bahrain, and Jordan, killing at least three US service members. Prices retreated from their session highs after Iran confirmed that mediators from Pakistan and Qatar had made contact with Tehran leadership. "The diplomatic apparatus has been active in recent days, and ideas from some mediators have been conveyed to the Islamic Republic of Iran," an Iranian foreign ministry spokesman said to reporters.
The Strait of Hormuz, through which roughly one-fifth of the world's seaborne oil flows passes, remains severely disrupted. Traffic through the critical waterway hit a three-week low on Friday, July 17, recording only eight crossings. Iran's Revolutionary Guard Corps reported Sunday that two oil tankers had "exploded" in the strait, per Reuters, while an international maritime safety watchdog flagged multiple vessels struck by projectiles over the past week.
The pressure on refined products has proven even more acute than the impact on crude prices. According to the report, roughly 2.1 million barrels per day of the 3 million bpd of global refinery capacity remain offline, with Russia's refinery exports also declining amid continued bombardment by Ukrainian forces. The 3-2-1 crack spread, a widely cited benchmark for refining margins, reached an all-time high above $70 per barrel on Friday, per Bloomberg data.
In the United States, gasoline prices at the pump crossed $4 per gallon again on Monday, according to data from AAA, reigniting inflationary pressures on the domestic economy just three months ahead of the midterm elections. "These dynamics help explain the market's message," said Natasha Kaneva, JPMorgan head of global commodities. "Distillate cracks in both the US and Europe have surged toward record highs — an indication that the shock is increasingly becoming a refining story rather than simply a crude supply story." Diplomatic channels remain open but fragile.
US Secretary of State Marco Rubio indicated over the weekend that Washington remains willing to negotiate, while Iranian spokesman Esmaeil Baghaei stated Monday that "Diplomacy is a tool through which we pursue our national interests, just like war." Analysts warn that with global oil inventories drawn down during the first phase of the conflict from March to May, market conditions are increasingly vulnerable to further shocks. Kaneva of JPMorgan cautioned: "No analogy is perfect, but the policy evolution around the Strait of Hormuz is starting to look increasingly familiar: bargaining, breakdown, escalation, and then back to bargaining. The debate is therefore gradually shifting from whether the Strait is open or closed to the terms under which it remains open… From a market perspective, inventories leave little room for error." Source: Yahoo Finance, reporting by Jake Conley.
Source: finance.yahoo.com