Brent crude futures surged nearly 4% on Wednesday, breaking through $107 per barrel. Mounting threats by Israel and Iran against energy infrastructure in the Middle East have intensified investor concerns that already severely disrupted global oil supplies could face further strain.
Brent crude futures climbed by $3.96, or 3.83%, settling at $107.38 per barrel. Meanwhile, the U.S. West Texas Intermediate (WTI) crude futures for April delivery edged up $0.11, or 0.11%, to close at $96.32 per barrel.
Reports from Israeli media indicated that Israel struck Iran's largest natural gas processing facility located in Bushehr province. On the same day, Iran issued threats to target oil installations in Saudi Arabia, the United Arab Emirates, and Qatar. According to Iranian state media, the Revolutionary Guard warned people to stay away from several facilities it described as "legitimate and primary" targets.
These facilities include Saudi Arabia's Samref refinery and Jubail petrochemical complex, the UAE's Al Hosn gas field, and Qatar's Mesaieed petrochemical complex and Mesaieed Holding Company. The renewed threats follow Iran's earlier attacks this week on energy infrastructure in the UAE. Widespread assaults on oil and gas facilities would aggravate significant supply disruptions already caused by a sharp decline in tanker traffic through the Strait of Hormuz.
Federal Reserve Chair Jerome Powell stated on Wednesday that the oil price surge would elevate inflation in the short term, but it remains premature to assess the full impact of rising energy costs on the U.S. economy. The Fed maintained its key interest rate within the range of 3.5% to 3.75%.
Citigroup forecasts that Brent crude could climb to $120 per barrel in the coming days. The bank projects supply disruptions could reach 11 to 16 million barrels per day by April. In a report to clients on Wednesday, Citigroup analysts suggested that if energy infrastructure suffers broad attacks and the Strait of Hormuz remains closed for an extended period, Brent could average $130 per barrel in the second and third quarters.
Analysts noted, "Markets are likely to continue rising until they find a price or market event that prompts the U.S. to halt its military operations." Concurrently, U.S. President Donald Trump issued a two-month waiver of the Jones Act in an effort to alleviate soaring fuel prices in the United States.
The Jones Act mandates that cargo shipped between domestic ports must be transported by U.S.-flagged vessels. Trump's waiver will permit foreign vessels to also carry oil and other energy supplies within U.S. waters, potentially reducing transportation costs.