Oil prices skyrocketed after the Houthi attacks. They broke the record from over 30 years ago
As Reuters reports, Brent crude oil futures rose $2.43, or 2.16 percent, to $115 on Monday. per barrel, after rising by 4.2 percent on Friday. Over the weekend, Iran's Houthi rebel allies attacked targets in Israel, sending markets into turmoil.
— The market has almost completely rejected the prospect of a negotiated end to the war, despite Trump's claims of ongoing “direct and indirect” talks with Iran, and is preparing for a sharp escalation of military action, which is a bullish signal for oil, with huge uncertainty about the timing and nature of the outcome, Vandana Hari, founder of Vanda Insights, an oil market analyst, told Reuters.
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Increase in oil prices. The reason is not only the Strait of Hormuz
The price of Brent crude rose 59% this month, the biggest monthly jump, exceeding the increases seen during the 1990 Gulf War. This is the result of Iran closing the Strait of Hormuz, which is a channel for one-fifth of the world's oil and gas supplies. Another bottleneck, the Bab-El-Mandab Strait, is also at risk.
“The conflict is no longer centered in the Persian Gulf and around the Strait of Hormuz, but now extends to the Red Sea and Bab el-Mandab – one of the world's most important chokepoints for the flow of crude and refined products,” JP Morgan analysts wrote in a note quoted by Reuters.
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As Reuters emphasizes, the world is approaching the “worst possible scenario”, and Tehran decides what will happen in the Strait of Hormuz and on the oil market. This scenario is a violent escalation in which Iran would inflict widespread damage to the Gulf's energy infrastructure, destroying pipelines, refineries, processing plants and export terminals throughout the region.
“Even militarily successful [dla USA] “the invasion would be meaningless if it triggered massive destruction of energy infrastructure, escalating an already serious market crisis into an unprecedented global energy catastrophe,” Reuters comments.
