Sharp Surge in Fuel Prices

Attacks in Saudi Arabia and strikes on oil tankers in the Strait of Hormuz have raised concerns about potential disruptions to the global fuel supply. Consequently, the price of crude oil in the international market reached a five-month high on Thursday (October 22).

The price of Brent crude—a global benchmark—rose by 3% to reach $112 per barrel, marking the first time it has hit this level since May 18.

On Wednesday, Houthi rebels in Yemen—who maintain close ties with Iran—launched attacks on several targets in Saudi Arabia. An attack on a civilian airport in Dammam resulted in two deaths and eight injuries. Additionally, a drone strike on a Saudi Arabian oil field claimed two more lives.

Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) reported that four vessels involved in the "illegal" transfer of oil in the northern Persian Gulf were struck and set ablaze on Wednesday. The IRGC claims this occurred after their forces had been tracking the vessels.

The IRGC further stated that three ships collided with mines west of the Strait of Hormuz. Iran also issued a warning to the United States, stating that if provocations continue, more extensive actions could be taken against U.S. bases in the Middle East.

In the meantime, the United States has ordered some diplomats and their family members to depart from certain diplomatic missions in Saudi Arabia. There are also plans to evacuate the families of diplomats from other U.S. missions across the Middle East. According to a report by the news agency Reuters, the Saudi state-owned oil company, Aramco, has instructed staff at its headquarters in Dhahran to evacuate and transition to remote work.

Fears are mounting that the conflict could spread further across the region. Approximately eight months ago, a de facto blockade of the Strait of Hormuz by Iran caused significant disruptions to the global fuel supply—a situation that, at the time, was feared could trigger the most severe supply crisis in the history of the energy market. Following attacks by the United States and Israel on Iran, oil prices surged past $100 per barrel during the first few weeks of the conflict. At that time, with oil shipments through the Strait of Hormuz halted, some market analysts predicted that prices could climb as high as $150 per barrel.

During the conflict, oil prices peaked at $126 per barrel in April, before falling back below $100 by late May. By early July, prices dropped to $71 per barrel amid hopes for a ceasefire. However, following the collapse of a potential agreement between the United States and Iran and the eruption of fresh conflict in the Gulf region, oil prices began to rise once again.

Nevertheless, according to data from energy intelligence firm Kpler, oil exports from the Persian Gulf have now surpassed pre-war levels. This is partly due to an increase in the volume of oil transported overland via pipelines to the Red Sea and the Gulf of Oman.

**Global Stock Market Declines**

Alongside the rise in oil prices, global stock markets experienced a downturn on Thursday, driven by concerns over inflation and the increasing cost of borrowing. The Stoxx Europe 600 index, which tracks major European companies, fell by 1%, while the UK’s FTSE 100 index declined by 0.7%.

In Asia, Japan’s Nikkei 225 index dropped by 2.7%, and South Korea’s KOSPI index fell by 3.5%. Hong Kong’s Hang Seng index saw a decline of 3%.

The high cost of fuel has also impacted the aviation sector. Shares of the US carrier American Airlines fell by nearly 4% in pre-market trading.

The company stated that it could face a loss this year due to exceptionally high fuel costs, effectively abandoning its earlier forecast that it would turn a profit in 2024.

Source: The Guardian