Markets · · 2 min read
Editor: Bohdan S.
Brent oil touches $110 for first time since May as Hormuz attacks grow
Attacks on tankers in the Strait of Hormuz and missiles aimed at Saudi energy sites pushed oil to a five-month high, keeping pressure on fuel prices and inflation.
The short answer
Brent crude briefly hit $110 a barrel on Friday, its highest since May, before closing at $109.86, up 3.7%. The Financial Times (FT) linked the jump to missiles aimed at Saudi energy hubs. Iranian attacks on ships in Hormuz added to supply fears, which could keep fuel costs and inflation elevated.
What happened
Brent futures, the global oil benchmark, touched $110 a barrel on Friday for the first time since May and settled at $109.86, a gain of 3.7%, CNBC reported. US crude (WTI) rose 3.5% to $101.41 and gained more than 10% over the week. The Financial Times (FT) said prices jumped on reports that Saudi-led forces intercepted missiles aimed at critical energy hubs. Saudi Arabia's military said one missile was heading for the Yanbu oil export terminal. In the Strait of Hormuz, at least nine ships have been attacked since Sunday as Iran tries to choke off exports.
What it means
Oil markets are pricing in a growing chance that supply gets cut, not just slowed. Exports through Hormuz, the narrow sea lane between Iran and the Arabian Peninsula, had recovered to prewar levels in September. For the week to Wednesday they fell to 9.4 million barrels a day, about 70% of the prewar average, according to Kpler data cited by CNBC.
Saudi Arabia is now a target too. Houthi militants in Yemen hit an Aramco office building in Dhahran on Tuesday and struck Riyadh's airport on October 10. Friday's missile aimed at Yanbu, a terminal on the Red Sea coast, shows that the threat now reaches export points on both sides of the kingdom. The attacks have also hurt people at sea: three seafarers were injured and two went missing this week, the International Maritime Organization said.
The gap between the two benchmarks is worth watching too. WTI climbed faster than Brent this week, but Goldman Sachs expects US crude to stay cheaper than Brent because shipping oil from the US to Europe has become expensive, Reuters reported.
Part of the US price jump has a domestic cause. Hurricane Isaias shut in Gulf Coast production, and US commercial crude stocks fell by more than 8 million barrels in the week to October 9, according to the Energy Information Administration.
Analysts already saw a large war premium in prices. Earlier this week Goldman Sachs estimated a risk premium of just over $20 a barrel, Reuters reported. That means a calmer outlook could pull prices down quickly, while further attacks could push them higher.
The bull case
For oil producers and energy shareholders, higher prices lift revenue and cash flow, which can support dividends and buybacks. Producers outside the conflict zone, including US shale firms, can sell into a tight market. If shipping through Hormuz stays disrupted and Saudi export routes remain under threat, supply could stay scarce for months, keeping prices high.
The bear case
Prices this high hurt consumers and businesses, from airlines to truckers, and can feed inflation that keeps interest rates elevated. Much of the move is a risk premium that could fade fast if attacks ease or a ceasefire holds. Demand can also weaken as people cut back on driving and companies trim spending, which historically has pulled prices back down.
Why it matters
For investors
Energy stocks and oil producers tend to benefit from higher crude, while airlines, transport and consumer-facing companies face higher costs. Rising fuel prices can also push up inflation expectations and bond yields.
The wider context
Expensive oil shows up at the pump and in delivery and heating costs. US diesel averaged $6.33 a gallon on Friday, more than 70% above a year ago, according to AAA data cited by CNBC.
Market impact
| Asset (ticker) | Possible move | Timeframe | Why |
|---|---|---|---|
| Brent crude oil (BZ=F) | ↑ Up | Short term | Attacks on Hormuz shipping and Saudi energy sites threaten supply. |
| Energy Select Sector SPDR Fund (XLE) | ↑ Up | Short term | Higher crude prices tend to lift oil producers' revenue and cash flow. |
| US Global Jets ETF (JETS) | ↓ Down | Short term | Jet fuel is a major airline cost and rises with crude. |
The FinPrism newsroom's view of how these figures could move, as of . It is general news commentary, not a recommendation to buy, sell or hold anything.
Frequently asked questions
Why did oil prices jump to $110?
Brent rose 3.7% on Friday as Iran stepped up attacks on ships in the Strait of Hormuz and Houthi militants fired missiles at Saudi Arabia, including one aimed at the Yanbu export terminal. Traders worry these attacks could cut supply from the Gulf.
How much oil is getting through the Strait of Hormuz?
Kpler data cited by CNBC showed crude exports through Hormuz at 9.4 million barrels a day in the week to Wednesday, about 70% of the average before the Iran war. Shipments had briefly returned to prewar levels in September.
Will higher oil prices raise gas and diesel prices?
Usually yes, with a lag. Diesel already averaged $6.33 a gallon in the US on Friday, more than 70% higher than a year ago, according to AAA. Sustained crude prices near $110 tend to keep pump prices and transport costs elevated.
Sources: Financial Times, CNBC, Reuters via Yahoo Finance
How this was made: written with AI assistance from the sources listed above, following our editorial standards.
