Oil prices surpass 100 dollars a barrel after US strikes on Iranian tankers

Susannah Streeter, chief investment strategist at Wealth Club, expects oil prices to remain high after rising above 100 dollars a barrel for the first time since July.

She said: “The FTSE 100 has opened lower as investors assess a toxic cocktail of inflationary pressures, with Brent crude nudging towards $100 a barrel and the US-Canada trade war escalating, adding another potential brake on global growth.

“Far from showing signs of resolution, the conflict in the Middle East appears to be becoming more entrenched, creating chronic supply concerns around crude and gas, while intensifying trade battles threaten to push up the cost of goods just as central banks are trying to get inflation under control.

“This may be a bonus for energy companies, with Shell and BP rising in early trade, but it’s highly painful for companies and consumers, and puts more pressure on central bankers to raise interest rates.

“Given the sustained impact of higher energy prices, the worry is that firms will have little choice, other than to raise prices, which risks creating another inflationary spiral.

“The prospect of higher rates is showing up in the bond markets, with gilt and Treasury yields shifting up yet again, making borrowing more expensive for governments, increasing the prospect of higher interest payments on the huge debts already piled up.

“Brent Crude has raced higher, hitting $100 for the first time since July, after Iran ratcheted up its offensive on the US and its allies, hitting two American vessels and firing missiles towards Jordan, while threatening crews in ports in Bahrain and Kuwait.

“More oil tankers have been struck, and Houthi rebels have also been attacking Saudi Arabia’s Jazan refinery, heightening supply worries about energy shipments. It comes after the US military targeted infrastructure on the key Iran export hub – Kharg Island.

“While other oil-producing nations have increased production, it’s not enough to offset the disruption wreaked across the Middle East, with prices looking set to stay stubbornly around $100 a barrel.

“UK and European gas prices have also risen again to levels not seen since December 2022.

“Usually, weaker demand for gas and lower prices during the summer months means stocks can be replenished, but the crisis has kept this process on go slow, and as we head towards the colder winter months, storage levels in the UK and Europe are the lowest for 13 years, keeping nations reliant on imports of expensive supplies.

“It’s set to add to the bill burden of households this winter, with domestic energy prices set to ramp up if a resolution to this conflict remains elusive.”