Oil prices jumped Monday after Donald Trump and Iranian leaders traded threats over the key Strait of Hormuz, while Israel said the Middle East war could last several more weeks.
With the conflict now in its fourth week and showing no sign of ending, the head of the International Energy Agency warned of the worst global energy crisis in decades and said the world economy was under “major threat” from it.
Oil prices jumped more than two per cent, with Brent earlier trading above $114, before dropping to $109.34 per barrel at 9:45 AM WAT, and West Texas Intermediate between $98.50 – $99.99 per barrel.
OPEC’s daily basket price is also experiencing significant volatility, with recent reports indicating a sharp rise to around $115.54 per barrel.
Observers, meanwhile, have also raised the prospect of a surge in inflation that could force central banks to hike interest rates, while the choking off of fertiliser shipments has also fanned concerns about global food security.
The US president on Saturday gave Iran 48 hours to reopen the Strait of Hormuz to shipping or face the destruction of its energy infrastructure.
The ultimatum, made just a day after the US leader said he was considering “winding down” military operations, came as the waterway — through which a fifth of global oil and gas flows — remained effectively closed.
Trump wrote on Truth Social that the US would “hit and obliterate” Iranian power plants — “starting with the biggest one first” — if Tehran did not fully reopen the strait within 48 hours, or 23:44 GMT on Monday, according to the time of his post.
That came a day after Trump ruled out a ceasefire agreement, saying Washington had the upper hand.
Iran warned Hormuz “will be completely closed” if Trump acted on his threat.
And powerful parliament speaker Mohammad Bagher Ghalibaf threatened to irreversibly destroy vital infrastructure across the region, which he said would cause oil prices to rise “for a long time”, if Tehran’s own infrastructure was hit.
Iranian media reported explosions in Tehran on Monday as Israel announced it launched another wave of strikes, while Saudi Arabia and the United Arab Emirates reported coming under fresh attacks.
The latest escalation came as Israel’s military said it will expand its ground operations in Lebanon against Iran-backed militant group Hezbollah, while a spokesman said the country faced “weeks” more fighting against Iran and Hezbollah.
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IEA boss Fatih Birol said Monday: “The global economy is facing a major, major threat today, and I very much hope that this issue will be resolved as soon as possible.
“No country will be immune to the effects of this crisis if it continues to go in this direction. So there is a need for global efforts.”
Birol added that the world was losing more oil each day than the combined impact of both 1970s oil shocks and Russia’s invasion of Ukraine.
His remarks came as central banks reconsider their monetary policies amid expectations that the surge in oil prices will send inflation soaring, with the Reserve Bank of Australia last week hiking interest rates.
Channels Television/AFP
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