File photo: Oil tanker passing through the Strait of Hormuz, December 21, 2018.
Hamad Mohammed | Reuters
Oil prices rose on Wednesday as escalating tensions between the United States and Iran raised concerns that the Middle East’s energy supplies could be further disrupted.
US benchmark west texas intermediate Futures for October delivery rose 1.75% to $94.66 a barrel. brent crude oil futuresThe international benchmark rose 1.55% to $99.44 per barrel.
The US military destroyed five Iranian crude oil tankers on Tuesday in retaliation for an attempted attack on a US warship. Centcom said in a statement that the U.S. warship successfully evaded the Iranian attack and that no U.S. personnel were harmed.
Daan Struiven, co-head of global commodity research at Goldman Sachs, said the escalating conflict between the United States and Iran is now in its seventh month, and as attacks on the shipping industry intensify, there is a growing risk that oil prices could soar above $120 a barrel.
“It’s definitely plausible,” Struiben told CNBC’s “Squawk Box Asia” when asked if oil prices could reach $120 a barrel. Goldman’s base case maintains a gradual recovery in Persian Gulf exports as producers adapt to the disruption, including through alternative shipping routes and ultimately adding pipeline capacity.
However, he said the recent escalation makes a more bullish scenario in which exports do not recover in the coming months more likely.
“Developments over the past few days point to an alternative price increase scenario in which exports actually slow down in the coming months and Brent prices rise above $120. The probability of that scenario is steadily increasing as we see an intensification and escalation of shipping attacks,” Struiben said.
U.S. and Iranian military operations had been suspended for about a month, with Washington focused on applying economic pressure on Tehran, but resumed attacks late last month.
