Oil prices rise after US strikes on Iran nuclear sites

Oil prices have risen following the US's strikes on three Iranian nuclear sites in a major escalation of the Iran-Israel conflict.
The price of Brent crude oil, the traditional benchmark global oil price, was up 2% at $78.52 a barrel on Monday. US crude also jumped, gaining 2% to $75.34 a barrel by midday in Asia.
The attacks by the United States on Saturday, which President Donald Trump claimed caused 'monumental damage', raised the stakes in the war between Israel and Iran.
The conflict began with an Israeli attack against Iran on June 13 that sent oil prices yo-yoing and rattled other markets.
Iran is a major producer of oil and also sits on the narrow Strait of Hormuz, through which much of the world's crude passes.
Closing off the waterway would be technically difficult to pull off, but it could severely disrupt transit through it, sending insurance rates spiking and making shippers nervous to move without US Navy escorts. A large container ship sails in the Strait of Hormuz / Credit: AP
'The situation remains highly fluid, and much hinges on whether Tehran opts for a restrained reaction or a more aggressive course of action,' Kristian Kerr, head of macro strategy at LPL Financial in Charlotte, North Carolina, said.
Iran may be reluctant to close down the waterway because it uses the strait to transport its own crude, mostly to China, and oil is a major revenue source for the regime.
'It's a scorched earth possibility, a Sherman-burning-Atlanta move,' said Tom Kloza, chief market analyst at Turner Mason & Co. 'It's not probable.'
Mr Kloza thinks oil futures will ease back down after initial fears blow over.
Ed Yardeni, a long-time analyst, agreed, writing in a report that Tehran leaders would likely hold back.
'They aren't crazy,' he wrote in a note to investors Sunday. 'The price of oil should fall and stock markets around the world should climb higher.'
However, Andy Lipow, a Houston analyst covering oil markets for 45 years, said countries are not always rational actors and that he wouldn't be surprised if Tehran lashed out for political or emotional reasons.
'If the Strait of Hormuz was completely shut down, oil prices would rise to $120 to $130 a barrel,' said Lipow, predicting that that would translate to about $4.50 a gallon at the pump and hurt consumers in other ways.
'It would mean higher prices for all those goods transported by truck, and it would be more difficult for the Fed to lower interest rates.'
US stock futures fell in response to the attacks. Dow futures dropped 175 points, or 0.4%. S&P 500 futures fell 0.4%, while Nasdaq futures tumbled 0.5%.
Defence-related stocks had risen when the markets opened on Monday morning.
In Tokyo, Mitsubishi Heavy Industries climbed 0.8% and ShinMaywa Industries, another major weapons maker, surged 1.5%.
The Nikkei 225 dropped 0.2%, a lesser drop than other stock market indices, due to larger losses being offset by gains from defence stocks.
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Daily Record

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