Oil prices jump following tanker attacks and slowing flows through the Strait of Hormuz

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Oil prices jumped 5 percent on Thursday, pushing Brent above $105 a barrel, following an escalation of hostilities in the Middle East and amid signs that the recovery in shipping through the Strait of Hormuz is losing steam.

The international crude benchmark rose sharply after oil tankers were hit by missiles in the Gulf and off Oman on Wednesday evening, and Saudi Arabia said three people were killed in Houthi attacks on its airports this week. Brent then traded around $104 per barrel.

Oil prices fell in the second half of September as shipping moved through the strait, a vital channel connecting Middle Eastern oil producers to international markets.

But traffic fell again following an intensification of hostilities this month, including a strike on an oil tanker off the coast of Qatar on Wednesday evening.

Data from trade consultancy Kpler showed that average weekly flows through the Strait of Hormuz climbed to 15 million barrels per day in late September, almost 90 percent of pre-war levels.

But these have since fallen to around 11 million b/d. Preliminary data shows that only 4 million barrels passed through the strait on Tuesday.

UK Maritime Trade Operations, which monitors shipping, reported nine attacks on ships near the strait in the first week of October, following 13 during September.

He said he was informed Wednesday evening that an oil tanker had been hit by several projectiles off the coast of Qatar and that casualties had been reported.

Separate maritime security sources said Iran fired missiles at an oil tanker off the coast of Oman on Wednesday evening, the first such attack outside the strait in a month.

Saudi Arabia said a man and two women were killed Tuesday and Wednesday in separate attacks claimed by the Iran-backed Houthis on two Saudi airports, wounding dozens.

The Atlantic magazine reported Wednesday that U.S. President Donald Trump is considering a plan to strike Iran before the November midterm elections.

“The whole story of the return of the Strait of Hormuz has been turned upside down,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management.

“Furthermore, very few people believed that Trump would prepare for strikes against Iran less than a month before the election,” he added.

Rising oil prices have fueled the global sell-off of government bonds, adding pressure on the public finances of indebted economies.

Ten-year government bond yields jumped 0.07 percentage points to 5.52 percent, their highest level since 2007.

Yields on French 10-year bonds rose 0.09 percentage points to 4.96 percent.

A hurricane in the Gulf of Mexico forced some U.S. producers to halt production, adding to upward pressure on prices. West Texas Intermediate, the US benchmark, rose 3.8 percent to $91.60 a barrel.

Much of the oil passing through the Strait of Hormuz in recent months has done so via shuttle services in which a small number of tankers pass through the waterway and transfer cargoes to waiting ships outside the Gulf.

The resulting high cost of shipping, along with a sharp reduction in refining capacity, has driven up prices of crude and refined products.

Brent is trading around 45 percent above its price on the eve of the Iran war, while European diesel is up almost 100 percent.

Additional reporting by Alice Hancock and Ian Smith in London