Oil price tops $100 a barrel as Iran war rattles commodity markets
Oil prices rose above $100 a barrel on Monday for the first time in four years as the Iran conflict entered its second week and concerns about disruptions to global energy supplies intensified.
Brent crude oil (BZ=F) futures are up 15% to $107.01 per barrel, while West Texas Intermediate (CL=F) is up 13.5% to $103.16 at the time of writing.
Brent briefly approached $120 per barrel at the beginning of the session as protracted conflicts reinforced fears that supply through the Strait of Hormuz could be disrupted. Oil prices last rose above $100 shortly after Russia invaded Ukraine in 2022.
US President Donald Trump said the increase in oil prices was “a small price to pay” for dismantling Iran’s nuclear program.
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Stephen Innes of SPI Asset Management said: “The market woke up to the sound every macro investor feared: the oil alarm bell. And this time it wasn’t a polite bell. It was a fire siren.”
Swissquote senior analyst İpek Özkardeskaya said that hopes for a diplomatic solution have diminished after the election of Mujtaba Khamenei, the second son of the late Iranian leader Ayatollah Ali Khamenei, as his successor.
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Saying that the decision did not please the USA, Özkardeskaya added: “This election means that Iran will not step back against the USA, and this means a potentially long-term war in the Middle East, which hosts approximately 50 percent of global oil reserves (BZ=F, CL=F) and approximately 40 percent of the world’s natural gas reserves.”
“Approximately 20% of the world’s oil and LNG passes through the now closed Strait of Hormuz, making it one of the most critical energy choke points in the global economy.”
Gold futures (GC=F) lost 1% to $5,103.80 per ounce, while spot prices fell 1.5% to $5,095.67 at the time of writing.
Tim Waterer, chief market analyst at KCM Trade, said: “Gold is on the back foot despite market turmoil today, with triple-digit oil prices pushing the dollar higher on inflation fears and dampening rate cut expectations.”
“The bulk of the gold (GC=F) price rise over the last 12 months has been driven by the dovish outlook for US interest rates, but given the inflation risk presented by oil at $100 per barrel, interest rate cuts are no longer certain and gold has been repriced accordingly.
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Investors expect the US Federal Reserve to keep interest rates steady at the end of its two-day meeting on March 18. The probability of the rates remaining unchanged in June, which was below 43 percent last week when the conflict started, has increased to over 51 percent.
