Oil prices rose on Wednesday after the U.S. said it had begun a new wave of strikes against Iranian military installations, while Iran's Islamic Revolutionary Guard Corps said it had struck U.S. military targets in the region, including in Bahrain, Kuwait and Jordan. The market got the headline it always gets from states at war: more force, more retaliation, more people downstream left to absorb the cost.
Brent futures gained 18 cents, or 0.2%, to $84.91 a barrel at 1214 GMT, while West Texas Intermediate futures rose 26 cents, or 0.3%, to $79.60 a barrel. Oil prices had already settled up 2% at a one-month high on Tuesday as attacks worsened a supply disruption in the Strait of Hormuz, through which about a fifth of the world's oil and liquefied natural gas passed prior to the war's outbreak. The numbers move fast. The people don't.
The State Monopoly on the Waterway
Washington had earlier reimposed a naval blockade of Iranian ports and launched overnight strikes, prompting the Revolutionary Guard to threaten to close "all other export corridors that benefit the U.S. and its allies." Late on Tuesday, the U.S. military said it had hit dozens of military targets near the strategic waterway and Iranian coastal areas in strikes lasting seven hours. In response, Iran's Islamic Revolutionary Guard Corps said on Wednesday it had struck U.S. military targets in the region, including in Bahrain, Kuwait and Jordan. The language is all about corridors, targets, and capabilities. The reality is a chokehold over trade routes and the civilians who live under the shadow of every escalation.
The U.S. military said its fresh strikes on Wednesday against Iran's coastal defence systems and cruise missile storage and launch sites were "designed to further degrade military capabilities Iranian forces have used to attack commercial shipping in the Strait of Hormuz." That is the official phrasing for a familiar arrangement: states smashing each other's hardware while ordinary people watch fuel costs, shipping disruptions, and the threat of wider war climb in real time. The Strait of Hormuz, after all, is not a board game. It is one of the world's most vital energy arteries, and the people who depend on it don't get a vote in any of these decisions.
Markets Read War as Opportunity
Analysts said Iran has been signalling it may use its Houthi allies in Yemen to shut the Bab el-Mandeb gateway to the Red Sea, opening a new front against Washington and putting two of the world's most vital energy arteries at risk. UBS analyst Giovanni Staunovo said the U.S. naval blockade of ships coming and going to Iranian ports was further strengthening oil prices, adding that Iranian crude exports were around 1.5 million to 2 million barrels per day in the last two weeks. The blockade, the strikes, the threats, the counterthreats — each one is presented as strategy, and each one lands as pressure on trade, prices, and the people who have to live with the fallout.
Goldman Sachs estimated in a note that Gulf exports recovered to more than 80% of pre-war levels after the U.S.-Iran memorandum of understanding in June but slipped back below 50%, or about 11 million bpd, over the last week. The bank said Brent could exceed $110 in the fourth quarter this year if the Gulf export recovery continues to stall. That is the other side of the war machine: financial institutions pricing instability like weather, turning blockade and bombardment into a forecast for traders.
Saxo Bank head of commodity strategy Ole Hansen said: "This is just all part of the war games," and added: "And the market has learned to adopt a little bit of a sanguine approach to some of these big announcements, simply in the sense that they often do not actually materialize." The market may shrug. The blockade doesn't. The strikes don't. And the Strait of Hormuz still carries the burden of decisions made far above the people who pay for them.