Oil finally cracked triple digits. Brent crude traded at $101.55 a barrel on Wednesday, up 3.6% and above $100 for the first time since late July, after US forces sank five Iranian tankers and Tehran answered with a missile barrage aimed at a base in Jordan. WTI climbed 4% to $96.56.
Five tankers destroyed in two days
US Central Command said its forces destroyed five tankers run by Iran's Revolutionary Guard on Tuesday, four in the Gulf of Oman and one near Kharg Island, the terminal that handles most of Iran's oil exports. The strikes followed two attempts in as many days to hit a US Navy ship with ballistic missiles. The ship evaded both, and nobody on board was hurt, the command said.
Crews were ordered off the vessels before they were hit. Washington says the ships belonged to a shadow fleet worth billions that bankrolls the Guard and its allies around the region.
It was the second such operation in four days. US forces destroyed three other Guard-linked tankers on Saturday, after Iran tried and failed to hit an American aircraft carrier and a destroyer.
Tehran answers through Jordan
The Revolutionary Guard responded by firing at the Al Azraq air base in Jordan. Jordanian defenses intercepted 18 ballistic missiles, and two more landed outside populated areas, officials there said. US officials dismissed the barrage as ineffective.
The part that rattled oil traders came next. Iran told crews aboard tankers near ports in Kuwait and Bahrain to abandon their ships, saying the vessels would be targeted. Carried out, that threat would push the fighting deeper into Gulf loading zones that have so far kept working.
A rally with momentum
Crude has been climbing for more than a week, and Wednesday's move builds directly on the Houthi strike on Aramco's Jazan refinery that lifted Brent to the doorstep of $100 a day earlier. Goldman Sachs analysts see $120 as possible if attacks on shipping keep spreading.
Expensive crude also feeds straight into fuel costs. US diesel is already at a record $5.85 a gallon, and every dollar added to the barrel makes that squeeze worse.
Stocks felt it too. The S&P 500 fell about half a percent by midday as the jump in crude revived inflation worries.
What to watch
The immediate question is whether Iran follows through on its threat against tankers at Kuwaiti and Bahraini ports. Beyond that, traders are watching the Strait of Hormuz itself, where close to 7 million barrels of crude and fuels still move through each day. That number is the one the market lives by.