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Oil prices settled at six-week highs on Wednesday after the U.S. struck Iran for the 11th night in a row and President Donald Trump warned that the U.S. will bomb Iranian bridges and power plants if Tehran fires on ships in the Strait of Hormuz.
The Brent crude contract for September delivery had risen nearly 5% to briefly top $95 a barrel on Wednesday morning before easing to $94.07 in the afternoon but still settling at its highest level since June 8. The global benchmark has risen for four consecutive sessions and booked its largest four-day dollar gain since April 29, according to FactSet data.
Brent crude peaked at around $125 a barrel in late April during the conflict but had eased to as low as $71 at the start of July before shooting higher again this week. Oil’s quick return to near $100 per barrel has pushed national average gasoline prices back above $4 a gallon.
The West Texas Intermediate contract for September delivery was up nearly 3% to finish at $86.83 — its highest level since June 11. The U.S. benchmark reached a session high of $88.61 earlier.
The latest move higher in oil prices comes as tensions rise between the U.S. and Iran, bringing traffic almost to a halt in the Strait of Hormuz and again raising the risks of oil-supply shortages.
Trump escalated his rhetoric against Iran on Wednesday morning, threatening to destroy bridges and power plants in the country if its forces continued to target ships in the Strait of Hormuz.
“From this point forward, any time the Islamic Republic of Iran shoots at a ship in the Strait of Hormuz, whether it be by Missile, Rocket, Drone, or any other device or weapon, the United States will bomb and destroy ONE BRIDGE OR POWER PLANT, including those located next to, or in, the Capital City of Tehran,” the president said in a post on Truth Social.
Secretary of State Marco Rubio also said on Wednesday that the U.S. would continue to attack Iran as long as it tried to exercise control over the Strait of Hormuz. Speaking to reporters in Manila on Wednesday, he said Iran at this point was “not serious about talks.”
U.S. Central Command said it carried out an 11th night of strikes against Iran that targeted aircraft hangars, maritime capabilities and drone-storage sites to prevent Tehran from attacking commercial ships moving through the key waterway. According to Iranian news agencies, explosions were heard in parts of southern Iran. The attacks came after Iran targeted U.S. military sites in Bahrain, Kuwait and Jordan on Tuesday.
“The Brent crude-oil price is higher by more than 10% this week, which is a major blow for global central banks and the new government in the U.K. that is trying to control the cost of living,” said Kathleen Brooks, research director at XTB. “The issue for the global economy as we move through July is that high prices will squeeze families’ cash in the second half of the year, which will have major economic consequences.”
The remarks from Trump and Rubio on Wednesday also “undermine the memorandum of understanding, since Iran interpreted the original June agreement as giving them control of the strait, which the U.S. does not agree with,” Brooks told MarketWatch.
See: An oil lifeline is under threat, and markets have yet to price in the growing crisis
With the Strait of Hormuz effectively closed, threats from the Iran-backed Houthi militant group in Yemen this week to block Saudi Arabian ship traffic in the Red Sea also risk further choking off Middle East oil.
“For now the Red Sea remains operational, but global supply chains are increasingly coming under threat as escalations in the conflict heat up,” she said. “This will keep upward pressure on global supply chains, and inflation risks are ramping up every day this conflict escalates.”
Elsewhere, U.S. commercial crude-oil inventories rose unexpectedly last week, up 2 million barrels for the week that ended July 17, according to data released by the U.S. Energy Information Administration on Wednesday.
The modest buildup in oil and gasoline inventories in the U.S. did provide some relief from worst-case scenarios in terms of overall crude supplies, but Strategic Petroleum Reserve stocks continue to fall, said David Russell, global head of market strategy at TradeStation.
Crude stocks in the Strategic Petroleum Reserve fell by 5.1 million barrels to 311.4 million barrels last week, EIA data showed. That’s the lowest total since 1983. The drawdowns are part of a U.S. agreement to release 172 million barrels from the facility.
The market isn’t on the verge of an immediate energy crunch, but “the current trajectory is precarious,” Russell said. The “pain has eased but the bleeding continues.”
Myra P. Saefong and Nora Redmond contributed.
