Key facts
- Brent crude oil prices rose towards $91 per barrel after US strikes on Iranian rocket launchers.
- Iran's foreign minister stated that diplomacy with the US is not possible.
- The conflict around the Strait of Hormuz has impacted shipping volumes.
- UK inflation reached 2.9% in July, influenced by energy prices.
- UK energy bills are set to increase by 4% in the final quarter of the year.
Oil prices surged past $90 a barrel as US forces conducted strikes on Iranian rocket launchers reportedly positioned to lay mines in the Strait of Hormuz. Brent crude, the international benchmark, approached $91 per barrel following the exchange of fire, the first in over a month.
Iran's foreign minister, Abbas Araghchi, stated that diplomacy with the US is not possible, asserting that "pressure doesn't work." Achilleas Georgolopoulos, a senior market analyst at Trading Point, commented that while new military operations are driving oil prices higher, the rally appears to lack the momentum to surpass previous conflict-driven highs. He also noted that expectations for progress in US-Oman-Iran negotiations have diminished.
Conflict in the Strait of Hormuz continues to affect shipping volumes, with vessels avoiding the waterway due to perceived danger. Goldman Sachs analysis indicates that total crude and oil product exports from the Middle East have risen to between 15 million and 16 million barrels per day, though this remains significantly below pre-conflict levels.
The renewed pressure on the oil market coincides with Federal Reserve chair Kevin Warsh's remarks on the central bank's readiness to act against rising inflationary pressures. In the UK, inflation climbed to 2.9% in July, partly due to the energy price cap reset and increased oil and gas prices. Energy regulator Ofgem confirmed that household energy bills would rise by 4% to £1,723 for the final quarter of the year, citing surging oil and gas prices as a consequence of the Middle East conflict. This increase is expected to put pressure on Prime Minister Andy Burnham, who has been focused on easing the cost of living for families.