U.S. oil prices rose more than 4 percent on Tuesday, to around $75 a barrel, on fears that the United States could become more involved in the conflict between Israel and Iran.
So far, the fighting has not seriously disrupted global energy flows even though some production and processing facilities in both countries have been affected. That helped keep a lid on oil prices in recent days.
But on Tuesday, President Trump demanded that Iran “surrender.” He said on social media that the United States knew the location of Iran’s supreme leader, Ayatollah Ali Khamenei, but that “we are not going to take him out (kill!), at least for now.” The president also held a meeting of his national security team at the White House.
Oil prices, which had settled below $72 a barrel on Monday, marched steadily higher on Tuesday, settling at their highest level since January. A barrel now costs around $10 more than it did just a week ago.
Predicting oil prices is notoriously tricky, but several things could lead to a big jump, analysts say.
One would be a more active U.S. role in the conflict, including a bombing of Iran. Another would be Israeli attacks on the infrastructure that Iran uses to sell oil abroad, namely the Kharg Island export terminal.
“The most likely scenario for disruption, should one occur, is an Israeli first strike on Iranian exports that provokes retaliation by Tehran against wider gulf region energy flows,” Clayton Seigle, a senior fellow at the Center for Strategic and International Studies, a Washington think tank, wrote in an analysis of the conflict.
Iran is positioned on the northern side of the Strait of Hormuz, a key oil shipping channel that connects the Persian Gulf to the Gulf of Oman. Roughly one-fifth of the world’s oil and related fuels pass through the strait daily.
And while Iran would be hard-pressed to close the strait for a long time, analysts say, it could harass tankers, including by disrupting their GPS signals. That would be a problem for countries like Saudi Arabia and the United Arab Emirates, which ship a lot of oil through the strait, as well as energy buyers like China and India.
The United States, as the world’s top oil producer, buys relatively little oil from the Persian Gulf, but oil is a global commodity. Anything that disrupts a large amount of supply is quickly reflected in how much it costs around the world.
Rebecca F. Elliott covers energy for The Times with a focus on how the industry is changing in the push to curb climate-warming emissions.
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