Oil prices rise sharply in the market after attacks by the United States and Iran disrupted global supply

Oil prices rose sharply as market trading began Sunday night, as US and Israeli attacks against Iran and retaliatory attacks against Israel and US military installations around the Gulf caused disruptions in the global energy supply chain.

Traders were betting that oil supplies from Iran and other parts of the Middle East would slow or stop. Attacks across the region, including two ships traveling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, could restrict countries’ ability to export oil to the rest of the world. According to energy experts, this would likely result in higher prices for crude oil and gasoline.

West Texas Intermediate, the light, sweet crude oil produced in the United States, was selling for about $72 a barrel late Sunday, about 8% higher than its trading price of about $67 on Friday.

About 15 million barrels of crude oil per day (about 20% of the world’s oil) are shipped through the Strait of Hormuz, making it the world’s most critical oil choke point, according to Rystad Energy. Tankers traveling through the strait, which borders Iran to the north, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran.

Iran had temporarily closed parts of the strait in mid-February for what it said was a military exercise. Further disruptions to that shipping channel could lead to lower supply and higher oil prices.

Attacks across the region, including two ships traveling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, could restrict countries’ ability to export oil to the rest of the world. According to energy experts, this would likely result in higher prices for crude oil and gasoline.

“It’s really a simple economic equation of supply and demand,” lamented Kelly O’Grady, News themezone MoneyWatch correspondent and co-host of “News Saturday Morning.” “If global supply were reduced by cutting off the Strait of Hormuz and preventing oil from flowing, prices would skyrocket.”

In this context, eight countries that are part of the OPEC+ oil cartel announced that they would increase crude oil production on Sunday. The Organization of the Petroleum Exporting Countries, at a meeting scheduled before the war began, said it would increase production by 206,000 barrels a day in April, more than analysts expected. Countries boosting production include Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.

“Roughly one-fifth of the world’s oil supply passes through the Strait of Hormuz, a vital artery for global trade, meaning markets are more concerned about whether barrels can move than about excess capacity on paper,” Jorge León, senior vice president and head of geopolitical analysis at Rystad, said in an email. “If flows through the Gulf are limited, additional production will provide limited immediate relief, making access to export routes much more important than primary production targets.”

Iran exports about 1.6 million barrels of oil a day, mainly to China, which may need to look elsewhere for supply if Iranian exports are disrupted, another factor that could drive up energy prices.

O’Grady noted that any action to block the Strait of Hormuz would be self-destructive for Iran.

“Remember, Iran’s revenue comes primarily from the oil it is willing to sell to countries like China, who will buy that sanctioned oil. And if they cut that off for other countries and other buyers, they are doing it to themselves as well,” he said.

“Now, of course, this is an existential moment for Iran. They could choose to go ahead with that. But everyone I’m talking to says it’s an unlikely and extreme scenario. But what you’ll see is the shipping companies saying, ‘I just don’t want to go through that,’ or the insurers, they’ll raise the price to secure that oil. And all of those things flow into the price of oil.”