Oil prices spiked higher overnight after the US warned Iran could be planning an imminent attack in retaliation for a missile strike on its consulate in Syria.
Any action would risk a dangerous escalation in the Middle East, and oil prices jumped higher to reflect the potential risk to supply. Analysts are uncertain of the course Iran will take with the country’s proxies in the operating area. Some predict it may be a cyber attack.
“The oil price has come under renewed pressure as conflict in the Middle East threatens to escalate, which would disrupt supply. US intelligence officials have warned of an imminent attack from Iran. US inventories of oil continue to build higher than expected, helping to remove some heat from the price,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.
Brent oil was trading at $90.65 at the time of writing.
In terms of the implications for the wider market, higher oil prices couldn’t come at a worse time for equity bulls after the US CPI came in hotter than expected yesterday. Higher oil prices have, however, helped the commodity-heavy FTSE 100 outperform on Thursday.
Oil prices will be watched closely for any move towards $100. Should Brent breach this level, it would further dash interest rate hopes.