%Oil prices are up about 1% as energy traders and investors assess the likely fallout in the Middle East after the U.S. attacked Iran’s nuclear sites over the weekend.
Analysts say any retaliation by Iran against the U.S. could disrupt global crude oil supplies, leading to further price increases.
West Texas Intermediate (WTI) crude oil, the U.S. standard, is up about 1.5% and trading at $73.95 U.S. per barrel.
Brent crude oil, the international benchmark, is up 1.4% at $77.13 U.S. a barrel.
Both oil prices had been much higher immediately after news broke of the U.S. attack on Iran, with Brent crude rising more than 5% and breaking above $80 U.S. per barrel.
WTI crude oil reached its highest level since January of this year before the price pulled back in early trading on June 23.
The increase in crude prices has the stocks of major oil producers such as %Chevron (NYSE: $CVX), %ExxonMobil (NYSE: $XOM), and %Shell (NYSE: $SHEL) also up about 1% on June 23.
U.S. President Donald Trump surprised markets with the announcement that his government directly entered the Iran-Israel conflict by launching attacks against three Iranian nuclear sites.
Markets are now bracing for Iran’s response, with the Iranian government saying the Islamic Republic reserves “all options” to defend its sovereignty.
The worst-case scenario for the energy market would be an attempt by Iran to close the Strait of Hormuz to ships carrying crude oil.
About 20 million barrels per day of crude, or 20% of global consumption, flows through the Strait of Hormuz each year, according to the Energy Information Administration (EIA).
U.S. Secretary of State Marco Rubio has warned Iran against attempting to close the strait, saying it would amount to “economic suicide” for the Islamic Republic.
Iran produced 3.3 million barrels per day of crude oil in May of this year, according to monthly oil market reports that cite independent sources.
Of that amount produced, Iran exported 1.84 million barrels per day, with the vast majority sold to China.
Investors are also watching the odds of a further destabilization of the Iranian regime and a potential change of government in Iran.
Iran’s Revolutionary Guard has also issued a warning against U.S. military bases in the Middle East, saying the bases are America’s “greatest vulnerability.”
