Oil prices soared in early trading today as nuclear tensions in the Middle East between the U.S., Israel and Iran ramped up. The concerns over restricted supply, however didn’t help oil stocks with BP (BP) down 0.2%, Shell (SHEL) off 0.1%, and Chevron (CVX) 0.3% lower.
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Nuclear Tensions
The Brent Crude oil price, the international standard, soared above $70 a barrel before retreating later over concerns of an attack by Iran on U.S. personnel in the region if ongoing talks over its nuclear activity fail. There have also been rumors of a potential Israeli strike on Iran targeting its nuclear facilities.
As a result of these tensions, U.S. personnel have been moved out of embassies and military bases in the region. President Donald Trump said the move had been made because the Middle East “could be a dangerous place.”
Iran’s Minister of Defense Aziz Nasirzadeh said Iran will strike U.S. bases in the region if talks fail and if the U.S. initiates conflict.
Additionally, if nuclear talks fail, it could mean continued sanctions on Iran which would limit supply. However, a resolution would add Iranian oil to the global market.
Weak Dollar
Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank Australia, told Reuters: “Some of the surge in oil prices that took Brent above $70 per barrel was overdone. There was no specific threat identified by the U.S. on an Iranian attack. But a geopolitical premium that keeps Brent above $65 per barrel will likely persist until further clarity on U.S. and Iran nuclear talks is revealed.”
Kathleen Brooks, research director at XTB, said that geopolitical tensions tend to only have a short-term impact on the oil price and that the rally could stall if concerns ease. However, she added that in the medium term, the oil price is likely to remain supported by a weak dollar.
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