Oil prices are rising to nearly a six-week high amid a wave of strikes between the United States and Iran in the Strait of Hormuz, through which roughly a fifth of the world’s oil supply travels during peacetime.
On Monday, Brent oil futures, the global benchmark, rose to hover around $97 a barrel — up 9 percent over the last five days and 19 percent over the last month. Monday’s market moves are approaching the highest point since July 24th, when prices topped $97.93.
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US West Texas Intermediate crude similarly rose to $92.27 a barrel, up 79 cents, also a near six-week high.
In recent days, strikes escalated in the Strait of Hormuz. The US hit three Iranian oil tankers on Saturday, while Iran’s Islamic Revolutionary Guard Corps (IRGC) said it had struck three tankers and three US-linked vessels in other areas.
“This is a reflection of continued conflict and exchange of fire. The supply deficits globally are persisting, and there is little end to these shortages,” Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security (CNAS), told Al Jazeera.
On Monday, Saudi Aramco’s Jizan facilities were struck for the second time in the last month, according to reporting from the Financial Times that cited two people familiar with the matter.
“The fact that a Saudi refinery in Jizan was hit, possibly delaying its return to production, didn’t help,” Ziemba added.
Amid increased strikes, there’s less traffic in the Strait of Hormuz, with an average of 10 commodity ships crossing the vital chokepoint each day over the last 10 days, according to Kpler, a data analytics platform.
“Crude went back down to what the pre-war level was in early July. Then it increased again, and then it reduced again, and now it’s increasing again on this weekend’s exchange plus the Aramco attack,” Arif Gasilov, a partner at the Gasilov Group, an energy advisory firm, told Al Jazeera.
“I would say that you might eventually see an inflection point, depending on how long this keeps going on, where a ceasefire doesn’t move the market at all, maybe by just a dollar or two.”
US consumers pinched
US consumers are feeling the impact of heightened oil prices at the petrol pump. The average price for a gallon (3.78 litres) of petrol has jumped 7 cents over the course of a week, reaching $4.15 nationally on Monday, up from $4.08 this time a week ago, according to the American Automobile Association (AAA), which tracks daily petrol prices.
That’s up from $4.04 this time a month ago and $2.98 from February 28th, when the US and Israel first struck Iran, marking a 39 percent increase since the war began.
Last week, diesel prices hit all-time highs at $5.85 per gallon.
“US diesel prices have never been this high, and now the countdown starts for the trickle-down to everything consumers buy… record diesel will start funnelling down into the economy,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post on the social media platform X.
Prices have continued to climb since, with average prices on Monday topping $5.90 per gallon.
“Markets are pricing in longer disruptions. It continues to be in product markets where the biggest disruptions lie, though, including diesel,” Ziemba added.
Those price gains are weighing on Americans, who have spent an average of $764.59 per household on fuel since the war began. That’s $418.82 more than usual, according to Brown University’s Watson School of International and Public Affairs.
Ahead of the US’s September 5-7 Labor Day weekend, the unofficial end of summer and a popular time for US travel, AAA forecasts showed a 20 percent increase in flight costs compared to the same weekend last year.
Ahead of the midterm elections, the economy is emerging as a key issue for US voters — and a potential warning sign for Republicans. Polls show voters souring on President Donald Trump’s handling of the economy, with his economic approval rating falling to a new low in a recent Financial Times poll. Just 17 percent of Americans approve of his handling of the economy.
An Economist/YouGov poll similarly found that 39 percent of Americans believe Democrats are doing a better job handling the economy, compared with 32 percent who said Republicans are.
China pressures
Southeast and East Asian markets rely more heavily on imports travelling through the Strait of Hormuz directly than the US, but Beijing has moved to insulate itself from the disruption by turning to domestic sources, including its strategic petroleum reserve (SPR).
“China has been managing this situation successfully since the beginning of the war. We know that China has many domestic resources, despite rising oil prices,” John Gong, an economics professor at the University of International Business and Economics, told Al Jazeera.
“China has been conserving its oil and gas consumption for quite some time now. China was prepared for these challenges,” Gong said.
He also stressed that China’s close relations with Russia give Beijing another source of supply, with Moscow able to provide nearly half of China’s daily oil needs.
China has also begun tapping into its SPR while reducing its reliance on imports, as Beijing accelerates a broader shift towards alternative energy sources and vehicles that require little or no oil to operate.
“We have national strategies focused on transitioning to clean energies like solar and green power,” Gong said. “When we look at the vehicles purchased in China, more than 50 percent of cars sold on the Chinese market are electric.”