Brent jumps 3.6% to $117.20 as shipping risks in Hormuz escalate
Key Facts
Brent crude jumped 3.6% to $117.20 a barrel in Friday trading, its highest level since March, according to the Associated Press. Oil’s rise coincided with a 0.3% decline in the S&P 500 and a 541-point, or 1%, drop in the Dow Jones at 12:33 p.m. Eastern time. The Nasdaq, by contrast, was up 0.1% in the agency’s reading. The Associated Press said higher oil prices weighed on the market and three out of every four stocks in the S&P 500 fell. In cryptocurrencies, EL7 data showed Bitcoin closed at $81,629.99 on October 23, compared with $81,416.09 the previous day and $84,093.42 on October 21.
Brent rose from below $97 a barrel at the start of October to $117.20 in Friday’s reading, according to the Associated Press, which described the level as the highest since March. The agency linked pressure on stocks to rising oil prices, as the war between the United States and Iran cut global oil supplies and pushed up energy costs. The move put energy prices at the forefront of factors affecting U.S. trading on Friday, alongside investors’ focus on inflation and the path of interest rates. The index figures cited by the agency were intraday readings, including the Dow Jones reading at 12:33 p.m. Eastern time. The report did not give an oil price at the end of the session.
On shipping through the Strait of Hormuz, the Associated Press cited Iranian state television as saying seven oil tankers caught fire or were damaged by mines during the night of October 21 to 22. The agency said verification of the account was required before it could be considered the largest daily toll since the war began. In its report on tanker movements, the agency cited Lloyd’s List Intelligence as saying tankers carrying oil from Gulf producers were crossing at night through a corridor near Oman’s coast protected by U.S. forces. The tankers’ positioning systems and phones are switched off during the passage, according to the report. After clearing the strait, the oil is transferred to other tankers in the Gulf of Oman for shipment to Asia.
Associated Press estimates point to the scale of the disruption to energy flows linked to the closure of the strait at the start of the war: the agency said the closure halted the passage of about 15 million barrels of oil a day. In a report published in September, the agency cited analysts’ estimate that the nighttime shipping route through the strait carried an average of about 6 million barrels a day or more. The analysts estimated that amounted to about 40% or more of prewar oil flows. In the same report, the agency said supplies from other producers, including the United States, added between 500,000 and 700,000 barrels a day and helped balance the global market at the time of publication. These figures provide context for oil movements through the strait and for the impact that disrupted shipping could have on supply flows.
Attention now turns to the Federal Reserve’s Federal Open Market Committee meeting on October 27 and 28, according to the central bank’s calendar. The Associated Press said markets expect rates to remain unchanged at the meeting, with a strong bias toward another increase in December. The personal consumption expenditures index is expected to show inflation rising at a rate of 3.6% in September, against the Fed’s 2% target, according to the agency’s forecasts. In September, the Fed raised its target interest rate range by a quarter percentage point to 3.75%-4%. In its statement at the time, it described economic activity as expanding at a solid pace and domestic spending as resilient, and said inflation remained elevated relative to the 2% target. The bank scheduled its next meeting after October for December 8 and 9.