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Oil prices have escalated to their highest levels since 2022, driven by reports that the United States military is preparing to brief President Donald Trump on new strategies regarding military action in Iran. Brent crude oil spiked nearly 7%, reaching over $126 (£94) per barrel at one point before retracting later in the day.
Military Briefing Fuels Market Concerns
According to information from Axios, US Central Command has devised a plan involving a series of “short and powerful” strikes against Iran, aimed at breaking the ongoing stalemate in negotiations with Tehran. The BBC has reached out to both US Central Command and the White House for official comments. This potential military escalation has contributed to a volatile energy market, particularly as peace discussions appear to have stalled, and the vital Strait of Hormuz remains effectively closed.
The Strait of Hormuz is a crucial maritime route, facilitating the passage of approximately 20% of the world’s oil and liquefied natural gas. The ongoing conflict in the region has already prompted significant increases in global energy prices, with Brent crude briefly touching $126.31 per barrel earlier on Thursday—the highest mark since Russia’s full-scale invasion of Ukraine. However, prices later slid to around $114, a fluctuation attributed to the expiration of current futures contracts, according to Naveen Das, a senior oil analyst at Kpler.
Impact on Fuel Prices and the Broader Economy
As crude oil prices continue to rise, the implications for consumers are becoming increasingly pronounced. In the UK, the average price of petrol has surged to 157p per litre, reflecting an increase of 24p from pre-war levels. Diesel, meanwhile, is now priced at 188.5p per litre, a substantial rise of 46p. Although the price of petrol has recently fallen, Simon Williams, head of policy at the RAC, noted that wholesale costs indicate it is currently more expensive for retailers than at any previous point since the conflict began.
The ramifications of the oil price surge extend beyond fuel costs. The UK government has issued warnings that consumers may soon face higher expenses for energy, food, and air travel. Some airlines have already begun increasing fares or scaling back services, while rising fertiliser prices threaten to exacerbate food inflation.
Proposed Military Actions and Regional Tensions
The Axios report suggests that the anticipated military actions may target critical infrastructure within Iran, potentially involving ground troops to regain control of the Strait of Hormuz for commercial shipping. In response, Iran’s Supreme Leader Mojtaba Khamenei has pledged to secure the strait, asserting that Tehran will eliminate “the enemy’s abuses of the waterway.”
The US has indicated it will implement a blockade on Iranian ports as long as Tehran continues to pose threats to vessels in the Strait of Hormuz, a move that could severely disrupt global energy shipments. The situation escalated further on Wednesday, with oil prices rising by 6% following reports of plans for an extended blockade on Iran.
Market Reactions and Future Projections
As concerns over inflation grow due to rising oil costs, market responses have been varied. Stock markets across Asia closed lower, with Japan’s Nikkei down 1.1% and South Korea’s Kospi declining by 1.
