Oil prices leap amid worries about crude market due to Middle East conflict
Oil prices are leaping and stocks are falling Friday over worries that Israel's attack on Iranian nuclear and military targets could escalate further and damage the flow of crude around the world, along with the global economy.
The price of a barrel of West Texas intermediate — the benchmark U.S. crude — jumped close to seven per cent on Friday morning to around US$72.65.
Brent crude, the international standard, was also up around seven per cent to US$74.30 for a barrel.
Western Canada select was selling at around $57.34 per barrel Friday morning.
Iran is one of the world's major producers of oil, though sanctions by western countries have limited its sales. If a wider war erupts, it could slow the flow of Iran's oil to its customers and keep the price of crude and gasoline higher for everyone worldwide.
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Beyond the oil coming from Iran, analysts also pointed to the potential for disruptions in the Strait of Hormuz, a relatively narrow waterway off Iran's coast, through which much of the world's oil moves on ships.
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Oil prices jumped on Friday on fears that a wider Middle East conflict could disrupt traffic in the Strait of Hormuz, through which much of the world's oil supply is shipped. File
But past attacks involving Iran and Israel have seen prices for oil spike initially, only to fall later 'once it became clear that the situation was not escalating and there was no impact on oil supply,' according to Richard Joswick, head of near-term oil at S and P Global Commodity Insights.
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That has Wall Street waiting to see what will come next.
For now, the price of oil has jumped, but it's still lower than it was earlier this year.
'This is an economic shock that nobody really needs, but it is one that seems more like a shock to sentiment than to the fundamentals of the economy,' said Brian Jacobsen, chief economist at Annex Wealth Management.
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Global stock markets also dipped on news out of the Middle East, with the TSX, Canada's main stock index, off about 25 points to 26,590 at around noon eastern time.
The Dow Jones Industrial Average was down about 400 points to 42,572.79 and the Nasdaq composite was off 100 points to 19,561.
Shares in Exxon Mobil rose 1.5 per cent and ConocoPhillips gained 1.9 per cent because the leaping price of crude portends bigger profits for them.
The Canadian dollar was up slightly to around 73.63 cents US.
The price of gold also climbed about 1.5 per cent, to over US$3,400 and close to a record high as investors searched for safer places to park their cash.
While sustained higher oil prices would likely lead to an increase in gasoline prices, they could be a blessing for Alberta's provincial budget, which was forecasting a $5.2-billion deficit on the expectation that oil prices would average about $68 per barrel.
Each $1 increase in the price of oil is predicted to increase provincial government revenues by about $750 million.
— with files from Reuters and Global News.
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