US-Iran war pushes oil prices above $90, US gasoline above $4 per gallon again
Benchmark oil prices crossed $90 per barrel for the first time in five weeks after the US launched a ninth day of strikes against Iran, with no clear path toward deescalation or a reopened Strait of Hormuz.
Futures on Brent crude (BZ=F), the international benchmark, rose as much as 3.8% Monday morning to briefly cross $91 per barrel before pulling back to around $88. Contracts on US benchmark WTI crude (CL=F) rose roughly 3% to cross $84 before falling to roughly $81 a barrel.
The US launched a fresh round of airstrikes in Iran, per US CENTCOM, targeting a variety of military and communications targets, while Iran continued its own wave of strikes against US military installations inside Gulf nations, including Kuwait, Bahrain, and Jordan, killing at least three US service members.
Prices pulled off their highs overnight after Iran said mediators from countries including Pakistan and Qatar contacted leaders in Tehran, as the market watches for any sign of diplomatic progress.
“The diplomatic apparatus has been active in recent days, and ideas from some mediators have been conveyed to the Islamic Republic of Iran,” an Iranian foreign ministry spokesman said to reporters.
Read more: How oil price shocks ripple through your wallet, from gas to groceries
As the US air bombing campaign enters its 10th consecutive day, the renewed wave of conflict between the US and Iran shows no signs of letting up. With no progress on the reopening of the strait, which usually sees roughly a fifth of the world’s seaborne oil flows, shipping through the critical waterway has fallen once more. Traffic hit a three-week low on Friday, July 17, with only eight crossings.
While crude prices have steadily risen over the past month, the pressure on refined products has been even greater, squeezing international markets for derivatives such as gasoline, diesel, and jet fuel. Roughly 2.1 million barrels per day of the 3 million bpd of refinery capacity remain offline, while Russia’s refinery exports continue to fall amid bombardment by the Ukrainian military.
The 3-2-1 crack spread, a commonly cited benchmark for the refining market, reached an all-time high above $70 per barrel on Friday, per Bloomberg data. In the US, where the inflationary impacts of the war have become a key economic issue, gasoline prices at the pump crossed $4 per gallon again on Monday, per AAA, reapplying pressure to the American domestic economy only three months ahead of the US midterm elections.
“These dynamics help explain the market’s message,” JPMorgan head of global commodities Natasha Kaneva said. “Distillate cracks in both the US and Europe have surged toward record highs — an indication that the shock is increasingly becoming a refining story rather than simply a crude supply story.”
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