Oil prices continued to climb on Thursday, as U.S. and Iranian military forces traded a second round of strikes around the Persian Gulf. Choppy trading in stocks and bonds reflected anxiety among investors about the effects of the war.
President Trump said the latest strikes, which targeted around 90 sites along Iran’s coast, were “retribution” for Iran’s attacks on commercial ships in the Strait of Hormuz, the vital waterway for the region’s energy exports. Mohammad Bagher Ghalibaf, Iran’s top negotiator in peace talks, said that the strait “will open only under Iranian arrangements, not American threats.”
The International Maritime Organization, a United Nations agency, recently urged shipowners and operators to avoid sending their ships through the strait. That would set back the recovery in ship traffic since a cease-fire agreement between the United States and Iran was signed last month. Mr. Trump said on Wednesday that he thought the three-week-old agreement was “over,” although he later suggested that Iran was open to making a deal. Iran has said nothing about new negotiations.
Oil prices keep climbing.
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Brent crude oil, the international benchmark, rose more than 1 percent on Thursday, to about $79 per barrel. Before this week’s outbreak of fighting, prices had slipped to $70 a barrel, dipping slightly below their prewar level.
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West Texas Intermediate crude, the U.S. oil benchmark, rose to above $74 a barrel. This grade of crude traded at $67 per barrel before the war.
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Gasoline prices don’t move in lock step with crude oil. The U.S. national average price of gas was $3.80 a gallon on Wednesday, according to the AAA motor club. That is more than 27 percent higher than it was on the eve of the war in late February.
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“The past few days’ price action makes one thing clear: markets were far too relaxed about the risks surrounding the deal — and far too bullish on how quickly regional supply could rebound,” Warren Patterson and Ewa Manthey, commodity strategists at ING, wrote in a research report.
A recovery in shipping in the Strait of Hormuz looks shaky.
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On Tuesday, 41 ships passed through the strait in both directions, according to Kpler, a maritime data company. That was more than during the peak of the war, when only a handful of vessels braved the narrow waterway between Iran and Oman each day, but significantly down from prewar levels of more than 130 ships per day.
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Many of the vessels that went through the strait this week used the Iranian corridor, which the authorities in Tehran have insisted is the only viable route. Attacks on ships near Oman on Tuesday set off the renewed rounds of strikes between U.S. and Iranian forces. Only two of the ships that transited on Tuesday took the Omani route, through which the U.S. Navy is providing guidance.
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“It’s in neither side’s interests for traffic through the Strait of Hormuz to grind to a complete standstill for a sustained period,” said Ben May, the director of global macro research at Oxford Economics. It was too soon to say whether turmoil in the strait would continue to push up oil prices, he added, “as it’s probable the cease-fire continues to be on and off.”
Stocks and bonds waver as investors fret about inflation.
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Futures for the S&P 500 were flat in premarket trading, although it looks to be another volatile day of trading when markets open in New York. The benchmark U.S. stock index closed with a small loss on Wednesday, after a choppy day in which the VIX volatility index, known as Wall Street’s “fear gauge,” hit its highest level in two weeks.
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Stocks in Asia were mixed, with Japan and India up but South Korea and Hong Kong down. Futures in Europe gained, but not by enough to reverse a deep decline on Wednesday.
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The recent rise in oil prices has stoked unease among bond investors about inflation, with the 10-year U.S. Treasury yield jumping to around 4.6 percent, its highest level since May. (Bond yields move inversely to prices.) Officials at the Federal Reserve have signaled support for raising interest rates if inflation does not decelerate, according to the minutes of their most recent meeting.
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Investors are also getting to grips with the economic effects of the war in Iran. On Wednesday, the International Monetary Fund downgraded its forecast for global economic growth this year.
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