Oil and gas prices continued to rise while stock markets plunged Tuesday as the war on Iran sparked by the U.S. and Israel spread across the Middle East.
By 4 p.m., West Texas Intermediate had risen $3.03 to $74.26 (U.S.) per barrel, an increase of 4.25 per cent. That was down off its morning peak of $77.69
Brent Sea Crude was up $3.40 to $81.14, an increase of 4.4 per cent, after having risen as high as $84.96 earlier in the day.
The crude oil hikes are already showing up at gasoline pumps in Toronto.
Friday, the day before the U.S. and Israeli strike which killed Iran’s Supreme Leader Ali Khameini and other senior government members, gasoline averaged $1.262 in the GTA, according to Gasbuddy.com. Tuesday, the average was just over $1.35.
For each $1 (U.S.) rise in the price of crude, there’s roughly a one cent (Canadian) rise in the price of gasoline at the pumps, veteran oil industry economist James L Williams, president of WTRG Economics said. And it shows up even before the crude being pumped out of the ground makes its way to refineries.
“It shows up almost immediately,” said Williams, adding that retailers are anticipating the cost of future batches.
By market close, the TSX composite index had plunged 756 points, more than two per cent, to 33,784 points, wiping out $120 billion in market value.
In New York, the S&P 500 was down nearly a full percentage point to 6,816 points, erasing well over $600 billon (U.S.) in value.
Airline shares around the world were also down, with many commercial flights in the Mideast being cancelled because of the war.
In the U.S., shares of both United Airlines and American Airlines were down by more than two per cent. In Toronto, Air Canada shares were off by more than one per cent.
With Iran continuing to threaten oil shipments through the key Strait of Hormuz, as well as its attacks on countries across the Middle East which host a U.S. military presence, some analysts predict the price of crude oil could rise as high as $100 (U.S.) per barrel.
“WTI prices could rise toward $80–$100/bbl, potentially exceeding $100 temporarily if disruptions are prolonged,” TD economist Marc Ercolao wrote in a research report.
With roughly 20 per cent of the global oil supply — and 30 per cent of the world’s liquified natural gas — normally being shipped through the Strait of Hormuz, alternative routes can handle only part of the volume and for a relatively short time, Ercolao noted.
“While alternative pipelines in Saudi Arabia and the UAE could redirect an estimated five million barrels per day, these routes are insufficient to fully offset a prolonged disruption,” Ercolao wrote. “Even a short-lived closure would likely result in prices ratcheting higher with each day of interruption, while insurance and freight premiums could keep prices elevated even after physical flows resume.”
Israel stepped up airstrikes against Iranian missile launchers and factories Tuesday, and Iran retaliated across the Gulf region, disrupting energy supplies and travel.
As explosions rang out in Tehran and in Lebanon — where Israel said it struck Hezbollah militants — the American embassy in Saudi Arabia came under drone attack.
In a post on X, a regional security analyst said it’s clear Iran is motivated to attack any oil or liquid natural gas moving through the Strait of Hormuz.
“Regional energy infrastructure is now a priority target for Iran,” wrote Martin Kelly, head of the advisory group at EOS Risk. “Following Iran’s comments ‘not a single drop of oil will leave the Gulf,’ we must consider that all Gulf region energy, oil and port infrastructure is at HIGH risk of Iranian (and possibly proxy) attack.
A report in FreightWaves, a shipping news website, said at least six ships carrying oil or gas have been hit by Iranian strikes since Saturday, and that several global container companies have stopped all cargo bookings in the Middle East.
With files from Star wire services
