Quick Bites | Oil Price Surges on Middle East Fears

Quick Bite – Oil Price Surges on Middle East Fears

Oil prices rose sharply on Wednesday after the US defence department authorised dependants of service members in parts of the Middle East to leave the region amid fears of an escalation between the US and Iran.

Brent crude jumped 5% to $70 a barrel in afternoon trading in New York. The rise in crude prices came hours after President Trump said he was now “less confident” of a nuclear deal with Iran, despite talks between the two countries.

Source: Financial Times

On Wednesday night the US president confirmed the withdrawal of non-essential personnel from the Middle East. “They’re being moved out because it’s a dangerous place and we’ll see what happens… They can’t have a nuclear weapon, very simple,” the president added.

The US has warned it would consider military options to prevent Tehran from securing a nuclear weapon if diplomacy fails. Israel has also pushed for strikes against Iran, believing the country is at its most vulnerable in decades and it has an opportunity to attack. Iran’s air defences have been hit hard in recent months by Israel, and Iran’s proxies in the region, Hezbollah, Hamas (and the Houthis in Yemen to a lesser extent) have been largely degraded by Israel since the 7 October 2023 attack.

Iran’s defence minister said on Wednesday his country would target American military assets in the region in response to any attack “without hesitation”, in comments that rattled energy markets.

“Crude has obviously reacted to the news coming out of the Middle East,” said one London-based oil broker.

A 60-day deadline Trump set for Iran to agree a new nuclear deal expires on Thursday. Tehran said this week there would be a sixth round of talks on Sunday, although that has not been confirmed by the US or Oman, which is facilitating the talks.

Gold is also responding to the increased tensions in the Middle East, and has been a popular refuge for investors: it is up 45% over the last 12 months to new all-time highs. Many commentators believe it has further to run if the fears of an attack on Iran’s nuclear facilities are realised.

Source: Trading Economics