Oil spikes as Trump's attack on Iran ramps up risks to supplies
(Bloomberg) — Oil surged after the US struck Iran's three main nuclear sites and threatened further attacks, exacerbating a crisis in the Middle East and stoking concerns that energy supplies from the region could be disrupted.
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Global benchmark Brent rallied as much as 5.7% to $81.40 a barrel, before paring some of that gain in heavy trading. Timespreads widened. US President Donald Trump said air attacks had 'obliterated' the trio of targets, and threatened more military action if Iran didn't make peace. In its initial reply, Tehran warned the strikes would trigger 'everlasting consequences.'
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Brent's prompt spread — the difference between its two nearest contracts, and a closely followed metric — widened to as much as $1.99 a barrel in backwardation, from $1.53 on Friday. That's a bullish pattern indicating concern about tight prompt supplies.
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The US assault — which targeted sites at Fordow, Natanz, and Isfahan — dramatically raises the stakes in the confrontation and increases the premium that traders are pricing into the global energy market. Still, the extent of the gains will depend on how Tehran opts to respond to the US moves.
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The oil market has been gripped by the crisis since Israel attacked Iran more than a week ago, with futures pushing higher, options volumes spiking along with freight rates, and the futures curve shifting to reflect tensions about tighter near-term supplies. The Middle East accounts for about a third of global crude output, and a sustained increase in prices would boost inflationary pressures worldwide.
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'The market will closely watch Iran's response — particularly whether it will move to disrupt Middle Eastern oil flows, directly or indirectly through its regional proxies,' said Muyu Xu, a senior crude analyst at Kpler Ltd. 'If Iran blocks the Strait of Hormuz, even for one day, oil can temporarily hit $120 or even $150.'
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There are multiple, overlapping risks for physical crude flows. The biggest centers on the Strait of Hormuz, should Tehran seek to retaliate by attempting to close the chokepoint. About a fifth of the world's crude output passes through the waterway at the entrance to the Persian Gulf.
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Iran's parliament has called for the closure of the strait, according to state-run TV. Such a move, however, could not proceed without the explicit approval of Supreme Leader Ayatollah Ali Khamenei.
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On Saturday, he said, guards removed him from a KGB pretrial detention center, put a black bag over his head, and handcuffed him before transporting him in a minibus. He and other prisoners had no idea where they were going. 'To be honest, I still can't believe it. I was afraid I'd wake up and everything would still be the same. I don't believe it, I still don't believe it,' he said, pausing frequently and wiping away tears. Tsikhanouski's children — his daughter, aged 9, and 15-year-old son — didn't recognize him when they were reunited. 'We came in and my wife said to my daughter, 'Your dad has arrived,'' he said, crying. 'At first she couldn't understand, and then she rushed in — she was crying, I was crying … for a very long time. My son too! These are emotions that cannot be described.' Tsikhanouski, who says his health has deteriorated behind bars, plans to undergo a medical examination in Lithuania. 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It got just a bit softer … At some point, word came down: Tsikhanouski must be kept alive, not killed.' Pointing the finger at Putin Tsikhanouski blames Russian President Vladimir Putin for propping up Lukashenko, both during the 2020 protests and to this day. Russia supports Belarus's economy with loans and subsidized oil and gas. In return, Belarus has allowed Moscow to use its territory to launch troops and weapons into Ukraine, and hosts Russian forces and nuclear weapons. Tsikhanouski expressed strong support for Ukraine, calling the Kremlin a common evil for both countries. 'If it weren't for Putin, we would already be living in a different country. Putin recognized Lukashenko's victory in the election, he called black white. That is, he refused to see the falsifications,' Tsikhanouski said. 'They help each other. Because of Putin, this illegal government is still in Belarus.' Some analysts have speculated that by releasing the charismatic and energetic Tsikhanouski, Belarusian authorities may be trying to sow division within the opposition. But Tsikhanouski insists he has no intention of challenging his wife's role as the internationally recognized head of the Belarusian opposition, and he calls for unity. 'Under no circumstances do I plan to criticize any Belarusians, condemn or complain about anyone,' he said. Tsikhanouski says he will not stop fighting and wants to return to active work as both a political figure and a blogger. But he is skeptical that Lukashenko, now 70, will step down voluntarily, despite his age. 'I don't know anymore — will he go or won't he?' Tsikhanouski said. 'Many people say nothing will change until he dies. But I'm still counting on democratic forces winning.' ___ Associated Press journalists Elise Morton in London, and Dasha Litvinova in Tallinn, Estonia, contributed to this report.
