Oil Tops $110 as US-Israel-Iran Conflict Disrupts Gulf Supply
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- Brent crude briefly climbed above $110 per barrel amid fears that the US-Israel-Iran conflict could disrupt energy flows from the Middle East, a region accounting for a significant share of global oil and gas exports
- The S&P 500 ended the week about 2% lower, reflecting heightened geopolitical anxiety and concerns over energy-driven inflation
- Tanker traffic through the Strait of Hormuz, which carries roughly one-fifth of global oil and liquefied natural gas supplies, was severely affected, while several Middle Eastern producers began curbing output as storage facilities filled and shipping risks rose
- Military strikes targeted oil storage facilities and energy infrastructure in parts of the Gulf during the conflict's second week, forcing global energy traders and refiners to seek alternative supply routes
- U.S. labor market data showed an unexpected decline in February payrolls and a rise in the unemployment rate to 4.4%, adding another layer of uncertainty for investors
- The upcoming U.S. consumer price index (CPI) report is expected to show a modest monthly increase in inflation, but may not fully reflect the recent oil price surge because it largely covers the period before the Middle East conflict intensified
- Federal Reserve rate-cut expectations have shifted, with LSEG data showing traders currently see a roughly even chance of a cut at the June meeting, down from prior expectations of multiple reductions this year
Why it matters: Brent crude above $110 is tightening supply at a moment when the Fed was already pivoting toward easing, with the Strait of Hormuz disrupted and Gulf producers curbing output. The roughly 2% weekly S&P 500 drop shows markets repricing both growth risk and the timeline for rate cuts, while the upcoming CPI report may understate the inflationary damage because it predates the oil spike.
