Oil settles up more than 2% after Trump threatens countries supporting Iran

[NEW YORK] Oil prices jumped more than 2 per cent on Thursday (Aug 20) to settle at the highest in nearly a month, after US President Donald Trump warned of retaliation against nations supporting Iran, his latest attempt to resolve a war that has stranded millions of barrels of Middle Eastern oil.

Brent crude futures settled up US$2.16, or 2.4 per cent, at US$93.78 a barrel, the highest since Jul 24. US West Texas Intermediate crude futures for September gained US$2, or 2.3 per cent, at US$87.83 a barrel, also the highest level since Jul 24.

On Wednesday evening, Trump threatened “economic warfare and isolation on an unprecedented scale” against Teheran, warning of consequences for any country that provided “any type of lifeline to Iran”.

US Treasury Secretary Scott Bessent said he would hold a press conference on Monday “to talk about exactly what we’re going to do.”

Thousands of people have been killed in the Iran war, which began on Feb 28 when the US and Israel launched military strikes on Iran. Since then, Teheran’s blockade of the Strait of Hormuz and Iranian attacks on energy facilities across the Middle East have sharply disrupted the flow of oil and gas to other parts of the world.

“For now, these new threats appear unlikely to sway Iran into relinquishing their primary source of leverage, that being control of the Strait, absent major concessions from the US,” oil trading advisor Ritterbusch and Associates said in a note.

“So, the beat goes on with no resolution in sight that would spur a major decline in oil prices back to levels anywhere close to those prior to the war,” Ritterbusch and Associates said.

Shipping traffic through the Strait of Hormuz on Wednesday was unchanged from the day before, far below pre-war levels, according to the latest shipping data.

Prior to the Iran war, shipments equal to about one-fifth of global consumption moved through the waterway. This week, the United Arab Emirates suspended all financial and economic transactions with Iran until further notice, highlighting the fraught ties between the major Gulf Arab oil producer and Teheran.

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The war has also impacted the supply of refined fuels and drawn down inventories, with less crude available to refiners.

US stockpiles of distillate fuel, including diesel and heating oil, fell last week for a third straight week, the Energy Information Administration said on Wednesday. However, crude inventories unexpectedly rose by 4.4 million barrels.

Trump’s threats against nations helping Iran could become a sensitive topic in US-China relations, said Alex Hodes, an energy analyst at StoneX, noting that China is the largest importer of Iranian crude oil. REUTERS