Oil Prices Surge After Trump Threatens Syria

Oil hit its highest in more than three years on Wednesday after Saudi Arabia said it intercepted missiles over Riyadh and international tensions about Syria grew.

Both US crude and global benchmark Brent traded at the highest levels since 2014 as concerns about airstrikes drove the market higher.

Geopolitical concerns overshadowed global crude inventories as the markets’ main driver.

“A bearish inventory report was quickly negated on word of intercepted rockets over Riyadh, which just adds to the recent spike in geopolitical tensions,” said Anthony Headrick, energy market analyst and commodities futures broker at CHS Hedging.

Prices began to rally as US President Donald Trump threatened to fire missiles at Syria in response to a suspected chemical attack last week.

Prices climbed further as Saudi Arabia’s air defence forces intercepted a missile over the capital Riyadh on Wednesday, Saudi-owned broadcaster Al Arabiya said, after at least three blasts were heard in the city.

Brent crude jumped to a high above US$72 a barrel, its strongest since early December 2014, after Trump’s comments, while US crude rose above US$67 a barrel. Gold rallied for a fourth day as investors ditched risk-linked assets such as equities.

Brent rose US$1.59 on the day to US$72.63 a barrel in late morning trade, while US crude futures rose US$1.62 cents to US$67.13 a barrel, a 2.5 percent gain.

Some major airlines were re-routing flights on Wednesday after Europe’s air traffic control agency warned aircraft flying in the eastern Mediterranean to exercise caution due to possible air strikes on Syria.

Trump has criticised Moscow for standing by Syrian President Bashar al-Assad.

“Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and ‘smart!’,” he wrote in a post on Twitter on Wednesday.

The United States and its allies are considering air strikes against Assad’s forces following a suspected poison gas attack last weekend.

Syria is not a significant oil producer, but any sign of conflict in the region tends to trigger concern about potential disruption to crude flows across the wider Middle East, home to some of the world’s biggest producers.

There are also concerns that the United States could renew sanctions against Iran.

“The focus right now is definitely on a possible military strike against Syria,” said Commerzbank’s head of commodity research, Eugen Weinberg. (Reuters)