Oil briefly reaches $119 per barrel

Oil briefly reaches $119 per barrel

The conflict in Iran is causing a massive disruption in the global oil supply and sending energy prices skyrocketing.

© Erin Hooley, Associated Press

It’s unclear how long the disruption will last — and therefore how long the markets will be squeezed and how high prices will ultimately go.

“The absolute disruption of flows through the Strait of Hormuz is by far the biggest disruption the world’s oil market has ever seen,” said Mark Finley, a nonresident fellow in energy and global oil at Rice University’s Baker Institute.

After the initial U.S. and Israeli strikes on Iran, oil shipping through the nearby Strait of Hormuz effectively halted, squeezing supplies.

About 20 million barrels of oil per day, approximately a fifth of global daily consumption, flows through the strait, which is near Iran. Last week, Tehran declared the strait closed and said it would attack any ship that tried to pass through it.

Oil prices initially jumped last week to about $80 per barrel, up from about $70.

Overnight, they soared to around $119 per barrel, though they calmed somewhat to less than $100 per barrel by Monday afternoon. International benchmark Brent crude was at $99 per barrel, while U.S. benchmark West Texas Intermediate was trading at about $95.

Finley said the cause of the additional jump was that the Strait of Hormuz is not opening as quickly as some may have hoped.

That’s because, he said, both sides seemed “to be telegraphing over the weekend that they were prepared to continue the fight.”

Gasoline prices are also on the rise. The national average price of gas neared $3.50 per gallon on Monday, up nearly 50 cents over the course of a week.

Asked if the world was facing a supply shock, Andrew Lipow, president of Lipow Oil Associates, said, “We’re headed that way.”

Read more at TheHill.com.

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