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Oil Prices Jump More Than $1 as Middle East Tensions Escalate

A pumpjack extracts oil in the Inglewood Oil Field in Los Angeles, Wednesday, Sept. 25, 2024. (AP Photo/Eric Thayer)
A pumpjack extracts oil in the Inglewood Oil Field in Los Angeles, Wednesday, Sept. 25, 2024. (AP Photo/Eric Thayer)
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Oil Prices Jump More Than $1 as Middle East Tensions Escalate

A pumpjack extracts oil in the Inglewood Oil Field in Los Angeles, Wednesday, Sept. 25, 2024. (AP Photo/Eric Thayer)
A pumpjack extracts oil in the Inglewood Oil Field in Los Angeles, Wednesday, Sept. 25, 2024. (AP Photo/Eric Thayer)

Oil prices jumped by over a dollar on Wednesday due to rising concerns Middle East tensions could escalate, potentially disrupting crude output from the region, following Iran's biggest ever military blow against Israel.

Brent futures leapt $1.08, or 1.47%, to $74.64 a barrel, while US West Texas Intermediate (WTI) crude spiked $1.12, or 1.6%, to $70.95 at 0650 GMT, Reuters reported.

During trading on Tuesday, both crude benchmarks surged more than 5%.
Oil markets were largely focusing on the narrative of a weakening global economic outlook denting demand for fuel, said Priyanka Sachdeva, senior market analyst at Phillip Nova.

"Still, the scale quickly turned towards fears of oil supply disruptions in the Middle East after Iran fired ballistic missiles at Israel," Sachdeva said.
Iran said early on Wednesday that its missile attack on Israel was over barring further provocation, while Israel and the US promised to retaliate against Tehran as fears of a wider war intensified.

Tehran said any Israeli response to the attack, which Israel said involved more than 180 ballistic missiles, would be met with "vast destruction.”
The direct involvement of Iran, an OPEC member, raises the prospect of disruptions to oil supplies, ANZ analysts said in a note, adding that the country's oil output rose to a six-year high of 3.7 million barrels per day in August.
"A major escalation by Iran risks bringing the US into the war," Capital Economics said in a note.
A panel of ministers from the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, meets later on Wednesday to review the market, with no policy changes expected. From December, OPEC+, which includes Russia, is set to raise output by 180,000 barrels per day (bpd) monthly.

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Russia's Central Bank Holds Off on Interest Rate Hike

People skate at an ice rink installed at the Red Square decorated for the New Year and Christmas festivities, with the St. Basil's Cathedral, left, and the Kremlin, right, in the background in Moscow, Russia, Friday, Dec. 20, 2024. (AP Photo/Alexander Zemlianichenko)
People skate at an ice rink installed at the Red Square decorated for the New Year and Christmas festivities, with the St. Basil's Cathedral, left, and the Kremlin, right, in the background in Moscow, Russia, Friday, Dec. 20, 2024. (AP Photo/Alexander Zemlianichenko)
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Russia's Central Bank Holds Off on Interest Rate Hike

People skate at an ice rink installed at the Red Square decorated for the New Year and Christmas festivities, with the St. Basil's Cathedral, left, and the Kremlin, right, in the background in Moscow, Russia, Friday, Dec. 20, 2024. (AP Photo/Alexander Zemlianichenko)
People skate at an ice rink installed at the Red Square decorated for the New Year and Christmas festivities, with the St. Basil's Cathedral, left, and the Kremlin, right, in the background in Moscow, Russia, Friday, Dec. 20, 2024. (AP Photo/Alexander Zemlianichenko)

Russia's central bank has left its benchmark interest rate at 21%, holding off on further increases as it struggles to snuff out inflation fueled by the government's spending on the war against Ukraine.
The decision comes amid criticism from influential business figures, including tycoons close to the Kremlin, that high rates are putting the brakes on business activity and the economy.
According to The Associated Press, the central bank said in a statement that credit conditions had tightened “more than envisaged” by the October rate hike that brought the benchmark to its current record level.
The bank said it would assess the need for any future increases at its next meeting and that inflation was expected to fall to an annual 4% next year from its current 9.5%
Factories are running three shifts making everything from vehicles to clothing for the military, while a labor shortage is driving up wages and fat enlistment bonuses are putting more rubles in people's bank accounts to spend. All that is driving up prices.
On top of that, the weakening Russian ruble raises the prices of imported goods like cars and consumer electronics from China, which has become Russia's biggest trade partner since Western sanctions disrupted economic relations with Europe and the US.
High rates can dampen inflation but also make it more expensive for businesses to get the credit they need to operate and invest.
Critics of the central bank rates and its Governor Elvira Nabiullina have included Sergei Chemezov, the head of state-controlled defense and technology conglomerate Rostec, and steel magnate Alexei Mordashov.
Russian President Vladimir Putin opened his annual news conference on Thursday by saying the economy is on track to grow by nearly 4% this year and that while inflation is “an alarming sign," wages have risen at the same rate and that "on the whole, this situation is stable and secure.”
He acknowledged there had been criticism of the central bank, saying that “some experts believe that the Central Bank could have been more effective and could have started using certain instruments earlier.”
Nabiullina said in November that while the economy is growing, “the rise in prices for the vast majority of goods and services shows that demand is outrunning the expansion of economic capacity and the economy’s potential.”
Russia's military spending is enabled by oil exports, which have shifted from Europe to new customers in India and China who aren't observing sanctions such as a $60 per barrel price cap on Russian oil sales.