Oil prices extended their rally on September 9, with Brent crude futures reaching $101.06 per barrel, topping the $100 mark for the first time since May 26. U.S. West Texas Intermediate (WTI) crude futures also advanced to $95.88 per barrel. Both contracts gained more than 5% for the week. The surge in oil prices is attributed to escalating tensions between the U.S. and Iran, as well as rising fuel costs in the U.S.
Domestic diesel prices in the U.S. reached record highs, inching toward $6 per gallon for the first time ever, $2.25/gal higher than a year ago. Gasoline prices are also standing $1.02/gal higher than a year ago. According to Patrick De Haan, head of petroleum analysis at GasBuddy, businesses are paying $284 million more per day on diesel, while consumers are paying $377 million more per day on gasoline, adding up to a $4.63 billion additional surcharge every week.
The U.S. Central Command stated on Tuesday that it destroyed five Iranian crude oil carriers in response to the targeting of a U.S. Navy warship by the Islamic Revolutionary Guard Corps. According to TankerTrackers.com, the five targeted Iranian tankers had collectively exported 45 million barrels of Iranian crude oil and refined products since May 2019. Iran's state media claimed it hit two American vessels, eight oil tankers, 10 U.S.-backed ships, and a U.S. military base in Jordan. Jordanian officials reported that 18 out of 20 Iranian missiles were intercepted, while the remaining two fell on unpopulated areas.
The U.S. Energy Information Administration (EIA) expects Brent crude prices to average around $90 a barrel in the second half of the year, having previously forecasted about $85 a barrel for the third quarter. Bespoke Investment Group noted that no matter what the CPI is on Friday, if crude remains at these levels or even climbs from here, there's only one direction CPI, and ultimately interest rates, will go from here.
The resurgence of military action comes just weeks after the world thought Washington and Tehran would move into a cold war characterized by isolation attempts, political pressures, and economic sanctions rather than physical assaults. Marco Rubio, U.S. Secretary of State, warned Iran that it will 'lose tankers' when it tries to 'hit U.S. naval ships.'
