Oil prices moved higher on Wednesday, with both major crude benchmarks up about 4% in early trading as conflict in the Middle East intensified. The gains followed the 11th straight night of U.S. strikes on Iran, keeping traders focused on the risk of further disruption to energy flows.
Shortly after 4 a.m. ET, Brent crude for July delivery was up nearly 4% at $94.23 a barrel, while front-month West Texas Intermediate rose 3.8% to $87.46. The price move came as U.S. Secretary of State Marco Rubio said Washington still wanted diplomacy, but argued that Tehran was not approaching talks seriously.
Speaking at the ASEAN Foreign Ministers’ meeting in the Philippines, Rubio said the dispute centers in part on the Strait of Hormuz, a key route for oil and other commodities. He said Iran was insisting on the right to control the waterway and warned that allowing that would create a dangerous precedent. According to the report, the U.S. Central Command said its overnight strikes targeted Iranian military operations centers, maritime capabilities, aircraft hangars, drone storage facilities and logistics infrastructure in an effort to reduce Iran’s ability to threaten commercial shipping in the strait.
Market participants also began to reassess the outlook for inflation and interest rates as energy costs climbed. Deutsche Bank’s Jim Reid said Brent’s move back above $90 a barrel revived worries about a broader stagflationary shock. Money markets were pricing in a 24.1% chance of a Federal Reserve rate increase this month and a 69% chance of at least a quarter-point hike in September, according to CME’s FedWatch tool. Analysts at ING said supply risks were mounting as hopes for a temporary ceasefire faded.
Source: cnbc.com
