Oil jumped close to $70 a barrel after a U.S. airstrike ordered by President Donald Trump killed a top Iranian general in Iraq, intensifying fears of conflict in the world’s most important crude-producing region.
In a turbulent start to the trading day marked by unusually heavy volumes, futures in London and New York surged by more than 4 per cent to levels not seen since the attacks on Saudi Arabia’s oil production in September.
The strike near Baghdad airport killed Qasem Soleimani, the Iranian general who led the Revolutionary Guards’ Quds force, according to a Defense Department statement.
While no oil installations or production were impacted, the killing of one of Iran’s most powerful generals is a provocation that ratchets up tension between Washington and Tehran, heightening fears of an armed confrontation that could pull in other countries. As focus shifts to how Iran will react, the country’s supreme leader, Ayatollah Ali Khamenei, vowed that “severe retaliation” awaits the killers of Soleimani, according to a statement.
“This is a seismic event in the region,” said Jason Bordoff, a former Obama administration official who has studied the Strategic Petroleum Reserve and now works for Columbia University. “This is how US-Iran tit-for-tat spirals out of control. Iran’s response will be severe and deadly. And certainly may include escalating attacks on energy infrastructure.”
Crude prices had pared some of their immediate gains by midday in Singapore but remained at the highest levels since September. Brent crude for March settlement was up $1.94, or 2.9%, at $68.19 a barrel on the ICE Futures Europe exchange at 7:11 a.m. in London. It earlier jumped as much as 4.4% to $69.16 a barrel.
In New York, West Texas Intermediate for February delivery was 2.9% higher at $62.93 a barrel. The contract earlier advanced as much as 4.4% to $63.84, exceeding September’s levels to the highest since May. Total aggregate volume for Brent and WTI was about 17 times the 30-day average.