Oil jumped about 4% on Thursday on reports that the White House wants the Pentagon to draw up new strike options against Iran, possibly for use ahead of the midterm vote on November 3.
Brent crude briefly topped $105 a barrel in early trading. By 9:25 a.m. Eastern it had eased to $104.29, still up $4.09 on the day. WTI was up $3.39 at $91.67.
What was reported
Two administration officials told The Atlantic, in a report published Wednesday, that the White House is looking for options it could use before Election Day. Officials have not settled on how big a strike would be or what it would hit, and Trump has not signed off on anything. A wider campaign could follow once the votes are counted, the magazine said.
According to Axios, the Pentagon has ordered US Central Command to be ready to resume major combat operations, though no date has been set. People familiar with the talks told NBC News that nothing had been decided. A White House official would only say the president has every option open.
Backers of acting before the vote mainly want to show strength, The Atlantic reported. They concede that a limited strike would not reopen Hormuz, restart talks with Tehran or bring pump prices down by Election Day.
Speaking in the Oval Office on Wednesday, Trump predicted oil would "drop like a rock" when the fighting ends. He has also said recently that the US would prevail "right after the election," then added, "maybe before the election."
A tanker hit off Qatar
On Wednesday, UKMTO, the British maritime security agency, said several projectiles had struck a tanker roughly 51 nautical miles north of the Qatari town of Madinat ash Shamal. It reported casualties but gave no name for the ship and did not say who was behind the attack.
That spot is deep inside the Gulf, well away from the Strait of Hormuz, where most recent attacks have taken place.
Strikes on shipping are picking up. Reuters, citing three maritime security sources, counted a dozen or more attacks on tankers carrying crude, LNG or LPG near Hormuz in the week to October 5. No week since the fighting began on February 28 has seen more. Twelve sailors were hurt on Tuesday when a projectile struck the Panama-flagged On Peace, according to India's foreign ministry.
Traffic has thinned as a result. Kpler data showed only seven commodity ships made the crossing on Tuesday, the fewest since July 23. Wednesday's count was 10. Kpler analysts put crude flows through Hormuz at a minimum of 10.1 million barrels a day, 27% below the previous week's high and roughly three quarters of normal. Gulf producers have made up part of the gap by sending more oil out through the Red Sea and terminals on the Gulf of Oman.
Fuel, bonds and stocks
The rally spread beyond crude. According to NBC News, diesel futures gained 4.5% during European hours, the 10-year Treasury yield rose to 5.35%, and S&P 500 futures were down 0.6%. At the pump, US drivers are paying an average of $4.36 a gallon for regular and $6.28 for diesel.
The G7 signed off last Friday on a 100-million-barrel draw on emergency crude and diesel, and on Wednesday IEA chief Fatih Birol said member countries were ready to release more stocks "if and when required." Aramco CEO Amin Nasser said this week that global inventories are already thin and could take two years to rebuild.
Closer to home, Hurricane Isaias has forced offshore producers to halt about 511,600 barrels a day, a quarter of Gulf of Mexico crude production, the federal offshore regulator said in figures released Wednesday.
What to watch
- Whether the White House settles on a strike plan before November 3
- How Tehran responds. Foreign Minister Abbas Araghchi said in late September that Iran was ready for renewed US strikes but that diplomacy was not over
- Isaias, which forecasters expect to bring a dangerous storm surge to the northern Gulf Coast by early Saturday
- The next meeting of the seven OPEC+ countries on November 1