Oil prices have surged nearly 7% on Thursday, driven by President Trump's statement that the US would continue attacks on Iran. The Brent crude futures LCOc1 rose $7.65, or 7.6%, to $108.81 per barrel at 0902 GMT, while U.S. West Texas Intermediate crude CLc1 futures climbed $7.06, or 7.1%, to $107.18 per barrel.
This significant increase in oil prices is a direct result of the heightened tensions between the US and Iran, which has led to fears of prolonged disruptions to oil supply. The market's reaction to Trump's statement suggests that investors are taking a cautious approach, anticipating potential supply chain disruptions.
The gains followed losses of more than $1 in both contracts before Trump's televised speech to the nation, indicating a significant shift in market sentiment. The absence of any clear mention of ceasefire or diplomatic engagement in the speech has also contributed to the market's anxiety.
Trump's statement that 'we're going to hit them extremely hard over the next two to three weeks' has added to the sense of uncertainty surrounding the conflict. His warning suggests that the US will continue to take a tough stance on Iran, which may lead to further escalation.
The threat of maritime risks increasing has become a major concern for market participants, who are now pricing in potential supply disruptions. This could have significant implications for global energy markets and economies.
In recent days, there have been several incidents involving Iranian cruise missiles hitting oil tankers in Qatari waters. These attacks have heightened concerns about the safety of maritime traffic in the region.
Some market participants have stopped dealing with cargoes priced off the Dubai Middle East benchmark, which is normally used to value nearly a fifth of global crude supply. This shift in behavior suggests that investors are becoming increasingly risk-averse.
The head of the International Energy Agency has warned that supply disruptions could start to affect Europe's economy in April, after the region had previously been shielded by cargoes contracted before the start of the war. This highlights the potential for widespread economic fallout from the conflict.
Ultimately, the next critical signal for markets will be Iran's response and that of the international community. If President Trump's pressure yields action to secure the Strait of Hormuz, it could help alleviate some of the concerns surrounding supply disruptions.
The recent surge in oil prices is a stark reminder of the global economy's vulnerability to geopolitical tensions.
