Oil prices soar with concerns spreading over global oil supply as Iran war drags on
· Toronto Sun
Oil prices continued to soar as the conflict in the Middle East intensified Monday, briefly touching US$119.50 earlier in the day before settling down due to concerns of a sustained supply crunch.
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The last time the price for a barrel of Brent crude exceeded US$100 was during Russia’s invasion of Ukraine four years ago.
Prices only eased after the Group of Seven nations held off on using strategic reserves to lower soaring oil prices.
“We’re not there yet,” French Finance Minister Roland Lescure told reporters Monday afternoon after chairing a meeting of his G7 counterparts. Still, he told reporters in Brussels that the group was “ready to take necessary and coordinated steps in order to stabilize markets, such as strategic stockpiling.”
Meanwhile, U.S. President Donald Trump called rising oil prices a “small price to pay” in the war and said the increase was only temporary.
“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!” Trump wrote on his Truth Social platform.
Iran’s threat along the crucial oil shipping route
The near-closure of the Strait of Hormuz, where 20% of the world’s oil supply passes through, has disrupted supply chains in the Persian Gulf, creating a domino effect on world energy prices.
With the war now in its second week, international shipping has almost come to a standstill at the entrance of the narrow waterway bordering Iran.
The threat of Iranian missile and drone attacks in the region has essentially halted tankers transporting oil and gas from the Gulf states.
Roughly 15 million barrels of crude oil are typically shipped every day through the Strait of Hormuz, according to independent research firm Rystad Energy.
The region’s major oil producers, like Iraq, Kuwait and the UAE, have cut production citing export constraints.
Exacerbating energy supply concerns
Along with the disruption of the critical trading route, several energy producers in the Middle East are halting operations following recent Iranian drone attacks.
Last week, Saudi Arabia announced the temporary closure of one of its largest oil facilities after a fire broke out following an Iranian drone attack, while Qatar’s state-run energy firm, QatarEnergy, has stopped liquefied natural gas production.
“The first week the crisis was a transportation issue, which could conceivably be resolved quickly,” Jim Burkhard, vice president and global head of crude oil research at S&P Global Energy, said in an analysis Monday. But production and storage concerns are increasingly piling up, he explained, and restoration “will be a massive technical exercise that could last weeks or more.”
Speaking to the Financial Times , Qatar’s Energy Minister Saad al-Kaabi had warned that if the Iran conflict continues for several weeks, Gulf energy exporters may be forced to halt shipments, potentially triggering a major global energy crisis.
Kaabi said oil could hit $150 a barrel if the Iran conflict continues over the coming weeks.
“If this war continues for a few weeks, GDP growth around the world will be impacted,” he warned.
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Canadians being hit at the pumps
Canadians are already seeing the effects of the Middle East conflict at the pumps, with higher prices renewing fears of inflation.
“In just a week, consumers have seen gasoline prices surge at one of the fastest rates in years after oil prices spiked following U.S. strikes on Iran and the effective closure of the Strait of Hormuz,” said Patrick De Haan, head of petroleum analysis at GasBuddy.com .
After more attacks over the weekend, he said fuel markets are now “rapidly recalibrating” to the risk of prolonged disruption and predicted that gas prices across Canada could climb another 20 to 50 cents per gallon this week.
According to data from Gasbuddy.com , the average price of fuel hit $1.54 per litre on Monday.
— with files from the Associated Press