Key facts
- Oil prices jumped over 3% on Monday due to attacks in the Red Sea and Gulf of Guinea.
- The Federal Reserve's FOMC meeting is scheduled for September 15-16.
- There is an 86.5% chance of a 25 bps Fed rate hike at the September meeting.
- Goldman Sachs and JPMorgan expect the Fed to raise interest rates by 25 basis points.
- Saudi Arabia suspended operations on its East-West oil pipeline, which can transport 7 million bpd.
- Discussions for a temporary shipping lane through the Strait of Hormuz were suspended.
Oil prices surged approximately 3% on Monday, driven by escalating threats to supply from attacks in the Red Sea and Gulf of Guinea, alongside the ongoing US-Iran conflict. WTI futures traded at $102.2 per barrel, 2.16% higher on the day, and Brent futures were up 2.14% at $106.8 per barrel.
The Houthis claimed to have launched a large-scale missile and drone attack against Saudi Arabia, striking a military base in Sharurah. Saudi state media did not confirm the attack but reported a separate projectile falling in the Jazan region. This escalation follows a drone attack on the East-West Pipeline last week. Additionally, a vessel in the Strait of Hormuz was struck by an unknown projectile, and an Iranian cargo vessel was reportedly struck off Qeshm Island.
Adding to market sentiment, Oman’s Foreign Minister announced that a Monday meeting between Gulf states and Iran to discuss temporary shipping management through the Strait of Hormuz had been postponed due to a lack of consensus. Last week's attacks on Saudi Arabia's East-West Pipeline, a crucial crude export route, had already put markets on edge, with concerns that up to 4% of global oil supply could be lost if it doesn't reopen soon.
The oil price rally comes ahead of the Federal Reserve's FOMC policy meeting on September 15-16. CME FedWatch data indicates an 86.5% chance of a 25 basis point rate hike, which would lift the federal funds target range to 3.75%-4.00%. Goldman Sachs and JPMorgan also anticipate a 25 basis point increase.