Oil prices have seen a sharp increase, with Brent crude rising by 3.8% to $104 a barrel on Thursday. This surge is attributed to growing concerns over escalating tensions in the Middle East and a reduction in production caused by a hurricane threat off the US coast.
A report in The Atlantic, citing unnamed officials, indicates that the White House has requested the Pentagon to develop options for strikes against Iran ahead of the US midterm elections. The report suggests that the scale and targets of these potential strikes, as well as whether they will proceed, are still under discussion. This development has reportedly diminished hopes that President Trump will avoid escalating the conflict with Iran before next month's polls.
Further risks to oil supply from the Middle East are highlighted by the ongoing US-Israeli war against Tehran, now in its eighth month. Attacks on tankers in the Strait of Hormuz have reached their highest levels during the conflict, disrupting traffic and intensifying supply concerns. The latest incident occurred on Wednesday when a tanker off the north coast of Qatar was hit by multiple projectiles, resulting in casualties, according to the United Kingdom Maritime Trade Operations.
In the Gulf of Mexico, oil prices also rose due to production squeezes as tropical storm Isaias intensified into the first hurricane of the Atlantic season. Shell and Chevron have announced production shutdowns as the storm approaches the region, with landfall forecast for Friday or Saturday.
The rise in energy prices has contributed to fears of inflation, strengthening expectations that central banks may need to increase interest rates. This has coincided with a continued sell-off in global bond markets and a fall in global stock markets on Thursday.