Oil prices surpassed $70 a barrel on Monday for the first time in more than three months as the US warned of increased threats to energy facilities in the Middle East, after the assassination of an Iranian general last week.
Brent crude, the international benchmark, was up 2.1 per cent at $70.07 in early European trading, having risen as high as $70.74 in Asian trade. Brent has climbed more than 5 per cent since US air strikes killed Qassem Soleimani in Iraq on Friday.
The latest gains followed a weekend of threats between Washington and Tehran, bringing the pair closer to conflict and raising tensions throughout the Middle East.
Crude last traded briefly above $70 a barrel in September after strikes — which the US blamed on Iran — temporarily knocked out half of Saudi Arabia’s oil production.
Soleimani was the head of the Iranian Revolutionary Guards’ overseas forces and controlled the regime’s extensive influence across Lebanon, Iraq, Syria and Yemen.
The US state department warned on Sunday that there was an increased risk of attacks on oil facilities and other targets in Saudi Arabia, amid widespread expectations Iran would retaliate for the killing of Soleimani.
Following the assassination, Iran said it would no longer abide by any of its commitments to the 2015 nuclear accord it signed with world powers.
The price of West Texas Intermediate, the US marker, strengthened on Monday by 1.7 per cent to $64.15.
Oil prices will “likely rise much further if Iran retaliates, either by attacking Saudi oil facilities as it did in September, or attempting to block the Strait of Hormuz, through which 20 per cent of global oil supply is transported”, said Michael Pearce, senior US economist at research firm Capital Economics.
Analysts at Goldman Sachs suggested the risk premium currently baked into prices was already too high and that “actual supply disruption” would now be necessary to keep prices at current levels.
Still, with Middle East tensions rising, investors have continued to shift out of riskier assets and into haven assets.
The price of gold for immediate delivery rose 1.3 per cent in early European trading on Monday to $1,572 an ounce, the highest level since early 2013.
Japan’s Topix equity index sank 1.4 per cent as the yen, also viewed as a haven asset, traded at a three-month high against the US dollar. The yield on US 10-year Treasuries was flat at 1.794, having dipped in Asian trade.