Crude Oil Drives Higher as Traders Brace for Longer Mideast War

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Crude Oil Drives Higher as Traders Brace for Longer Mideast War.

commodities :: 8hrs ago :: source - bloomberg

By Paul Burkhardt

(Bloomberg) -- Oil pushed higher as traders braced for the Iran war to stretch into April and attacks continued across the Middle East, with transit through the critical Strait of Hormuz still largely halted.

Global benchmark Brent rose near $110 a barrel after erasing an earlier drop, while West Texas Intermediate was near $96. President Donald Trump pushed back a deadline for striking Iran’s energy infrastructure by 10 days, prolonging uncertainty over the course of the war well into next month.

The extension allows more time for talks, but also for the US to amass additional forces in the region. That includes Marine Expeditionary Units and soldiers from the Army’s 82nd Airborne Division, according to people familiar with the matter. The Wall Street Journal said the Pentagon is looking at sending as many as 10,000 extra ground troops.

Brent crude is on pace for a record monthly gain in March, as the war between the US, Israel and Iran rocks the oil-rich Middle East. With Tehran forcing the near-complete closure of the Strait of Hormuz, the conflict has severely restricted flows of energy that are vital to the global economy.

“The reduced flow of around 8 million barrels a day continues to critically tighten the global supply outlook,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “The market will see an accelerated tightening as global oil on the sea is reduced and tankers that left the Gulf before the blockage have now reached their destination and offloaded their cargoes.”

Attacks are continuing. Among them, Israel said it struck Iran’s primary facility for the production of missiles and sea mines in the city of Yazd, while Kuwait said on Friday that drones targeted Shuwaikh port, resulting in damage, and Mubarak Al Kabeer port came under a missile and drone attack. Saudi Arabia intercepted drones in its eastern region.

While there was a roughly 60% probability of the war finishing by end-March, there were 40% odds of a longer conflict, possibly through June, according to Macquarie Group Ltd. analysts. The latter scenario could drive oil to $200 a barrel, they said in a note.

The Trump administration is also trying to arrange a meeting for Vice President JD Vance in Pakistan this weekend to discuss an off-ramp to the war in Iran, CNN reported, citing two US officials. Other top administration staff could also join the meeting, CNN said.

Iran said on Thursday, through the Tasnim news agency, that it is waiting for a response after rejecting a 15-point US plan to end the war and offering its own conditions. Those include recognition of Tehran’s authority over Hormuz, which links the Persian Gulf to global markets.

The vital waterway carried about a fifth of global oil flows before the war started at the end of February. Despite the broader standstill, there has been a recent marginal increase in Iran-linked ships — mostly bulk carriers and LPG vessels — attempting to pass through. Two large container ships linked to China’s state-owned Cosco Shipping Corp. attempted to exit the Persian Gulf on Friday through the Strait of Hormuz, before making an abrupt U-turn near Iran and motoring back.

The United Arab Emirates has told the US and other allies it would participate in a multinational maritime task-force intended to reopen the strait, the Financial Times reported, citing three people familiar with the situation. Abu Dhabi would deploy its own navy, two of the people said.

On Thursday, Trump said that Iran had allowed 10 oil tankers to sail through the strait as a goodwill gesture. Treasury Secretary Scott Bessent, meanwhile, said that an insurance program meant to boost shipping through the artery would begin soon.

Brent has surged by about 52% so far in March, and petroleum product costs from diesel to jet fuel have rallied even more, burdening businesses and consumers. The increases have triggered concern about a simultaneous spike in global inflation and slowdown in growth.

Across the Asia-Pacific region, India cut taxes on diesel and gasoline to cushion the impact of surging crude prices on its refiners, and Vietnam froze some fuel levies until mid-April. New Zealand said there was evidence of increased demand, partially from hoarding or stockpiling.

--With assistance from Charles Gorrivan, Charlie Zhu, Sarah Chen and John Deane.