Oil jumped midweek as traders marked up the odds of supply hiccups from the Middle East. West Texas Intermediate for October delivery climbed 1.75% to $94.66 a barrel, and Brent moved up 1.55% to $99.44 a barrel. The move followed a fresh flare in U.S.-Iran hostilities that put shipping lanes back in focus.
The U.S. military said Tuesday that it destroyed five Iranian crude tankers after Iran tried to hit an American warship. The ship dodged the attack and no U.S. personnel were injured, according to Centcom. The back-and-forth, now seven months in, had briefly gone quiet for about a month as Washington leaned on economic pressure before strikes picked up again toward the end of last month.
Appearing on CNBC's "Squawk Box Asia," Daan Struyven of Goldman Sachs, the co-head of global commodities research, said "It's definitely plausible" that oil could climb to $120 per barrel if attacks on shipping intensify. Goldman's base case still assumes Persian Gulf exports gradually recover as producers reroute cargoes and, over time, add pipeline capacity. But Struyven said the latest flare-up raises the chance of a more bullish path where exports do not rebound in the coming months: "The developments over the last few days do suggest that that alternative upside price scenario, where exports actually stagnate over the coming few months, and where Brent exceeds $120 is the probability of that scenario is definitely going up as we're seeing an intensification and broadening of the shipping attacks."
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If shipping risks keep piling up, crude could make a run at triple digits and then some, which tends to filter into everything from gas prices to airfare to freight costs. That is not a reason to panic, but it is a reminder to watch how energy feeds into your monthly budget and the broader inflation picture.
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