Oil price rockets to wartime high as Trump eyes fresh military action in Iran
Brent oil surged to a new high during early-morning Thursday trading after reports that US president Donald Trump is set to receive a briefing on new military operations in Iran, raising fears over an end to the fragile ceasefire between the two nations.
The global benchmark surged as much as 7.1 per cent this morning, breaching $126 per barrel, while the West Texas Intermediate jumped above $110.
It marked the highest price since the war began on 28 February, but has since inched down slightly to $122.8.
The surge came after markets were spooked by reports that the US head of Central Command is to brief Trump later today, signalling a potential restart of combat operations.
A ceasefire between the two nations has been in place since early April, but negotiations between the two have all but ground to a half after both sides refused to relinquish control of the Strait of Hormuz.
Talks set to take place over the weekend in Pakistan also failed to materialise after Trump cancelled a trip of his envoys.
Central Command had also requested hypersonic missiles to be sent to the Middle East, which would mark the first time the US army has deployed these weapons.
Willing to keep it up
Trump has also signalled that he is willing to maintain the US Navy blockade of Iranian ports for as long as it takes, with Iran responding by keeping the waterway shut to oil tankers, choking global supply.
On Wednesday, Trump warned that Iran “better get smart soon”, and in a meeting with oil executives discussed what steps could be taken to “continue the current blockade for months if needed”, according to White House official.
US officials are banking that the blockade will force Iran to cap its oil wells and shut down production once its oil facilities are filled.
Impasse woes
Trump said: “The blockade is somewhat more effective than bombing.
“They are choking like a stuffed pig.”
The blockades have reduced daily passages to nearly zero, with the International Energy Agency calling the conflict the biggest supply shock in history.
But Trump confirmed he would not lift the blockade until he secures a nuclear deal with Tehran, which Iran has given no indication of doing.
The US is now also seeking the forfeiture of two Iran-linked oil tankers that were seized by naval forces, and would represent an economic escalation.
Oxford Economics warned that a six-month impasse in the waterway could send oil prices rocketing to a staggering $190 by August, while other analysts have warned of a potential global recession.