Brent Climbs Above $109, Highest Since Mid-September, as Iran War Risk Persists and Stocks Fall

Eight months after the U.S.-Israeli attacks on Iran in late February closed the Strait of Hormuz, Brent crude climbed above $109 a barrel today, Oct. 16. That is its highest level since mid-September and only a few cents short of a five-month high.

U.S. West Texas Intermediate rose to $100 a barrel, the first time it has crossed that line since September. At midafternoon, oil was on track for a gain of about 5% on the week. OilPrice.com's live board showed Brent up about 3.1% and WTI up about 3%.

Stocks slide with energy

Equities fell alongside the jump in crude. By midafternoon the S&P 500 was down more than 1% and the Nasdaq Composite was down about 2%.

Thursday was already shaky. The S&P 500 fell 0.5% for a second straight loss after setting an all-time high. The Dow added 51 points, or 0.1%, and the Nasdaq dropped 1.3% as technology shares took hits, according to the Associated Press.

Reports of new threats to Gulf energy sites

Mehr News Agency, an Iranian outlet, reported that some facilities belonging to Iran's oil industry had been attacked. It also reported that the Islamic Revolutionary Guards Corps called for the evacuation of some oil facilities in Saudi Arabia, the United Arab Emirates and Qatar. Saudi, Emirati and Qatari authorities have not been quoted confirming any such call.

"Any further escalation of attacks on energy infrastructure would lead to further price increases," Ole Hvalbye, an analyst at SEB, told Reuters.

Around a fifth of the world's oil and natural gas normally moves through Hormuz. Prices have swung between roughly $96 and almost $110 for Brent over the past month on uncertainty about how the war ends, according to Fox 9's price tracking. Brent closed Monday at $106.95, up 2.1%.

Diesel is the pressure point

NBC News reports that the Russia-Ukraine war is compounding the Iran shock. Ukrainian strikes on Russian energy infrastructure have taken much of Russia's refining capacity offline, and Russian strikes have hit energy assets in Ukraine. Buyers of Russian diesel are looking elsewhere.

There is little room to make up the gap. Refineries in the U.S. and Europe are already running near maximum capacity on diesel. Diesel futures rose more than 1% today. Diesel has climbed faster than regular gasoline in recent months, and AP reports some businesses have already passed higher freight costs to customers as added fees on online orders and mailed packages.

Regular gasoline averaged $4.32 a gallon nationwide this morning. AAA put it at $4.35 on Monday.

The Russian diesel deal

On Oct. 9, President Donald Trump announced on social media that he had agreed with Russian President Vladimir Putin to supply the United States with more than 300,000 tons of diesel. Fox 9 reports it reverses a ban on Russian oil imports that has stood since the start of Russia's war with Ukraine. Trump has said he is taking steps to bring down fuel prices.

Rep. Gregory Meeks of New York, the top Democrat on the House Foreign Affairs Committee, introduced the "No Corrupt Russian Oil Deals Act" today. The bill is described as bipartisan. It would bar the U.S. International Development Finance Corporation from investing in Russia's energy sector, revoke Treasury Department OFAC general licenses and bar new ones, and require the administration to sanction Russia's energy industry.

"This deal will not lower the cost of living for Americans, who are already paying the price for Trump's self-inflicted, failed war in Iran. Instead, it will provide millions of dollars to Putin," Meeks said. He added that Trump is "cozying up to Putin to make self-serving deals instead of standing with Ukraine."

The sources contain no response from the White House to Meeks's bill, and no figure for how much diesel the deal would actually add to U.S. supply relative to demand.

What comes next

The political clock is short. Inflation is a top issue in the Nov. 3 midterm elections, and fuel costs feed directly into it. The Meeks bill has been introduced, and whether it gets a committee hearing or a floor vote is undecided. Whether the Gulf warnings turn into confirmed strikes on Saudi, Emirati or Qatari facilities will decide whether Brent holds above $109 or pushes past its five-month high.