Oil prices hit $100 for the first time since May
3 hours ago
Bloomberg via Getty Images
Oil prices hit $100 a barrel for the first time since May as the escalating conflict in the Middle East reignited fears over global energy supplies
Brent crude – the global benchmark for oil prices – rose more than 6%on Thursday following several days of increases as the US stepped up military strikes against Iran
Prices spiked after Houthi militia in Yemen attacked oil tankers in the Red Sea, threatening a key export route that Saudi Arabia has used to bypass the Strait of Hormuz
Gas prices have also risen steadily over the past month, with the benchmark UK gas price currently at around 150 per therm, up from around 98p at the end of June
Oil prices had been falling following a temporary ceasefire between the US and Iran
They dropped back to levels last seen before the US and Israel began military action against Iran on 28 February
However, the ceasefire has failed and this week US Secretary of State Marco Rubio said the people in charge in Iran were “not ready to make a deal”
The ongoing conflict risks pushing up inflation for many countries, including UK and the US leading to higher prices for consumers
Higher oil prices typically lead to petrol and diesel becoming more expensive
While drivers are affected directly, households could also see prices of other goods, such as food, increase due to businesses passing on higher transportation costs to customers
Inflation has fallen both in the UK – down to 2.6% in the year to June helped by slowing diesel and petrol prices – and in the US to 3.5%
But questions remain whether the slow down will prove short-lived due to the renewed conflict in the Middle East
New data released on Thursday showed that UK petrol prices have risen by 5p a litre since the beginning of July, hitting reaching almost £1.56
Diesel is at £1.72 a litre, on average, according to the RAC
Average gasoline prices in the US have surpassed $4 a gallon once more, up from $3.92 a month ago, according to motorist advocacy group AAA
“More expensive fuel and energy can ripple through the wider economy, increasing costs for businesses and ultimately feeding through into the price of food and other goods,” said Jonathan Raymond, investment manager at Quilter Cheviot
“This creates another headache for central banks as they continue their battle against inflation
“If energy prices remain elevated, policymakers may come under pressure to keep interest rates higher for longer or even raise them. This would come as a blow to mortgage holders and borrowers already feeling the strain.”
Why are UK fuel prices rising again?
The Bank of England, which sets UK interest rates, has held them at 3.75% in its last four meetings
Paul Dales, chief UK economist at Capital Economics, said he believed the Bank will “almost certainly” hold them again. But he said analysts still expected that interest rates could be cut next year if energy price rises ease
Kevin Warsh, the newly-appointed chair of the US Federal Reserve, last week told Congress that the central bank had “no tolerance to persistently elevated inflation”
US President Donald Trump had pushed Warsh’s predecessor, Jerome Powell, to cut interest rates
Trump has made it clear he expects Warsh to fulfil his demand for reductions in borrowing costs for Americans
But the Fed held US interest rates between 3.5% and 3.75% at Warsh’s first meeting last month. He also told Congress that he was committed to “restoring price stability” in the wake of the Middle East conflict impacting prices
Oil
Natural gas
