Oil surges on report of Iran strike options before midterms

Oil prices rose again on Thursday, sending Brent crude above $103 a barrel. The move followed a report that the White House had asked the Pentagon to draw up strike options against Iran that could be carried out before the U.S. midterm elections. The rally added to inflation worries and set off another round of selling in global stocks and bonds.swissinfo

Brent climbed more than 3% to about $103.85 in European trading. CBS News reported that both Brent and West Texas Intermediate rose more than 4% at one point, with Brent passing $104. Bond yields went up with oil. The 10-year Treasury yield rose four basis points to 5.32%, and the gap between French and German 10-year yields widened to 140 basis points.cbsnews+1

The report behind the move

The Atlantic, citing two administration officials, reported that the size and targets of any strikes were still being discussed, and that no decision had been made on whether to go ahead. The magazine said a limited operation before the Nov. 3 vote could be followed by a larger one afterward. Bloomberg said the report ran counter to a widespread assumption that President Donald Trump would hold off on escalating the conflict before the vote. Trump has said several times that he might renew attacks after the midterms, though he has also said "maybe before the election".finance.yahoo+2

Shipping in the Gulf added to supply fears. The National reported that strikes on tankers in the Strait of Hormuz reached their highest weekly rate since the conflict began on Feb. 28, and that the number of ships passing through fell to its lowest in more than two months, according to data from Kpler. Separately, Iran-backed Houthis struck two airports in Saudi Arabia, killing three people. A storm in the Gulf of Mexico also shut some U.S. oil production.bloomberg+1

"Flows from the Middle East have recovered, but constrained product supplies, extreme logistics costs and a high risk of Iranian escalation are keeping prices elevated," said Saul Kavonic of MST Marquee.energyconnects

Markets under pressure

The Stoxx Europe 600 fell 1%, and the MSCI Asia Pacific Index dropped 1.6%. Futures on the S&P 500 pointed to a second straight day of losses after the index hit a record earlier in the week. Samsung Electronics shares fell in Seoul. The company reported a nearly ninefold rise in quarterly profit, but that still missed expectations.swissinfo

Higher oil prices are making things harder for the Federal Reserve, which raised rates in September for the first time since July 2023. According to Bloomberg, money markets see about a 20% chance of another hike this month and have fully priced one by December.bloomberg+1

"Another rate hike is probably coming this year because current policy isn't very restrictive," said David Russell of TradeStation.theedgesingapore+1