Oil spikes past $106 as us strikes iran’s kharg lifeline
Crude vaulted above $106 a barrel on Monday for the first time since July 2022 after American warplanes pounded Kharg Island, Iran’s main export terminal, and Washington warned the Persian Gulf chokepoint could face round-the-clock bombardment if Tehran keeps squeezing the Strait of Hormuz.
Brent leapt 3 % to $106.02 while West Texas futures topped the symbolic $100 mark, reviving memories of last decade’s energy shock. Traders dumped short positions within minutes of confirmation that two US destroyers had launched precision strikes on radar arrays and storage tanks responsible for shipping 90 % of Iran’s crude.
The math is brutal: 21 % of seaborne supply still trapped
Shipping data show zero laden tankers have exited the Gulf since hull insurers cancelled cover three weeks ago; Saudi emergency pipelines to the Red Sea can reroute at most 5 m bpd, leaving a 3 m bpd hole the International Energy Agency’s promised 400 m barrel release cannot plug quickly. Asia will get first dibs on those strategic barrels, yet refiners from Dalian to Daesan already bidding mid-$110s for prompt cargos signal the relief will be thin.
Riyadh’s repair crews have restored 60 % capacity at the Yanbu terminals, but the kingdom’s own 1 m bpd stockdraw last week exposes how thin the cushion really is. Meanwhile, Tehran’s Revolutionary Guards keep lobbing missiles at anything with a radar signature inside the 34-mile-wide strait.
White House officials say a multinational naval escort—think Operation Earnest Will 2.0—will be announced within 72 hours, but diplomats privately admit assembling enough grey hulls could take weeks. Markets are not waiting: call options struck at $125 now trade at 18 % implied volatility, double the January norm.
Consumers feeling the pinch at the pump should brace for another 30 ´/gal spike by Thanksgiving unless insurers blink first. Cheap oil vacations are over; the next move depends on whether insurers recalculate the odds of a direct hit on Saudi super-tankers. For now, every tick above $100 chips another $5 bn a month from OECD import bills and transfers it straight into Moscow’s war chest. The rally has only just started.