Oil prices surged on Thursday, October 8, following a report that the White House had requested the Pentagon to prepare strike options against Iran, potentially executable before the US midterm elections. Brent crude climbed above $101 per barrel, recovering from a dip below $99 earlier in the week. Meanwhile, the US West Texas Intermediate traded near $89. According to The Atlantic, the White House's move contradicts the assumption that President Donald Trump would avoid escalating tensions with Tehran before the elections. The report noted that no final decisions had been made regarding the scale or targets of any potential strikes, but a limited operation could precede a larger campaign post-midterms.
In other developments, US producers shut in over 510,000 barrels per day of crude output as Tropical Storm Isaias approached, significantly impacting regional supply. The year had seen a sharp rally in oil prices due to disruptions in West Asia, which drained energy inventories and fueled global inflation. While shipments from the conflict-ridden region have partially recovered, attacks on vessels, including a recent strike off Qatar, have surged, causing casualties.
The US Central Command reported that 20 million barrels of crude were moving through the Strait of Hormuz. Additionally, Iran-backed Houthis targeted two Saudi airports, killing three people and injuring 36 others. The Saudi-led coalition responded by destroying 82 targets in Yemen. The attacks disrupted airport operations and damaged property, though the method of attack remained unspecified.
Regional risks, strikes on ships, and increased demand from Asian buyers for crude from distant loading ports have driven freight rates to historic highs, adding significant costs to the supply chain. According to Bloomberg, hiring a very large crude carrier to transport US oil to Asia now costs $77 million, compared to an average of $9.2 million last year.