Brent crude futures surged nearly 5% to trade at $106 per barrel. WTI Crude, meanwhile, gained more than 4% to $104 per barrel in the early morning hours of Thursday. Oil prices crossed the crucial $100 mark in March after the closure of the Strait of Hormuz, marking the first time since Russia’s invasion of Ukraine in 2022. Front-month Brent futures hit a record monthly gain of 64% in March, Reuters cited LSEG data dating back to June 1988.
Here’s what Trump said
Trump said that US forces will ‘finish the job’ in Iran soon as “core strategic objectives are nearing completion”. “We’re now totally independent of the Middle East, and yet we are there to help,” he said. “We don’t have to be there. We don’t need their oil. We don’t need anything they have. But we are there to help our allies,” he added.He reiterated his claim that Iran’s “navy is gone, their air force is in ruins” and Tehran’s leaders are all dead. He claimed that joint strikes had “obliterated” the Islamic Republic’s nuclear program, and “if we see them make a move, even a move for it, we will hit them with missiles very hard again”. The US President claimed that Iran’s ability to launch missiles and drones has been curtailed.
His comments suggesting that the US might attempt to wrap up the war within the next two-three weeks may have spurred investor worries about heightened attacks on Iranian power and crude facilities, unless some deal is achieved, said Garima Kapoor Deputy Head of Research and Economist at Elara Capital. “The focus of the US has moved away from regime change and opening of Hormuz. We believe, as US Iran escalation ends, the cost of insuring vessels passing through Hormuz would come down too, allowing gradual movement of energy to resume in Hormuz.,” she added.
“Uncertainty will prevail in the near term with crude oil prices remaining firm, even as hopes have been offered for closure or war within next 2 to 3 weeks. So far Iran doesn’t seem to be buckling under any pressure of America, but America’s degrees of freedom are reducing, suggesting limited ability to continue longer. We see a finality to war soon. Heightened Volatility is likely to persist in the short term,” she further said.
What lies ahead?
Even if the war eases in the near-term, oil prices may not cool down soon. Ambit Institutional Equities, in it recentreport, said that even if geopolitical tensions cool off, oil prices will remain elevated, with $80 being the new normal for Brent due to infrastructure damage, geopolitical risk premiums, and inventory restocking.
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