By CARLO PIOVANO/Associated Press and Cheddar Staff
LONDON (AP) — The price of oil surged Friday on concerns that Iran might respond to the killing of its top general by the United States by disrupting global supplies of energy from the Middle East.
News that Gen. Qassem Soleimani, head of Iran’s elite Quds Force, was killed in an air attack at the Baghdad international airport prompted expectations of Iranian retaliation against U.S. and Israeli targets.
Amid past flare-ups with the U.S., Iran threatened the supply of oil that travels from the Persian Gulf to the rest of the world. About 20% of oil traded worldwide goes through the Strait of Hormuz, where the shipping lane is only 3 kilometers (2 miles) wide and tankers have come under attack this year.
The international benchmark for crude oil jumped 4.5%, or $2.98, to $69.23 a barrel in London trading. The U.S. contract was up 4.3%, or $2.60, to $63.78.
“Revenge will come, maybe not overnight, but it will come and until then we need to increase the geopolitical risk premium,” said Olivier Jakob, head of consultancy Petromatrix, in a note to investors.
He noted that Iran's response may not be limited to the Strait of Hormuz.
In September, Yemen's Iran-backed Houthi rebels launched drone attacks on the world's largest oil processing facility in Saudi Arabia. The strike briefly took out about half of the supplies from the world's largest oil exporter. The U.S. directly blamed Iran, which denied involvement.
Launching attacks that can't be easily linked back to Iran limits the chances of direct retaliation.
However, Iran has also directly targeted tankers. This year it seized a British-flagged tanker, the Stena Impero, for several weeks. And it has shot down a U.S. military drone.
About 80% of the crude oil that travels through the Strait of Hormuz goes to countries in Asia, including China, Japan, India and South Korea. But cutting off the Strait of Hormuz puts Iran at risk of a more significant response from not just the U.S. but the global market as well, Head of Petroleum Analysis at Gasbuddy Patrick Dehaan told Cheddar. Dehaan said there is enough spare capacity within OPEC, the intergovernmental organization whose members account for almost half of global oil production, to make up for a shortage if Iran closes the strait.
Saudia Arabia is one of the few countries that has "spare capacity to very quickly increase output."
"Saudia Arabia is probably aligned with the U.S. and has the means to drive oil prices back down with spare capacity should Trump appeal to them to do so," he said.
A rise in the global price of oil will have a wider effect, particularly in oil-importing countries with big manufacturing sectors like Germany and Italy. Those countries fared worst in the stock market on Friday, with their main indexes falling 1.4% and 1.1% respectively.
The economic damage could be limited given that the energy market is flush with oil while the growth in demand has softened as major economies have slowed. And crude-producing countries - particularly the United States - have been pumping oil at a high rate. The U.S. now produces 13 million barrels of oil a day and imports between 6-8 million barrels of oil, largely coming from Canada, Dehaan said.
Though OPEC and key ally Russia agreed last month to cut their oil production, many countries have been pumping above their limits, which has so far kept the price of oil in check. On Friday, the Brent benchmark rose to its highest since May after largely hovering around $60 a barrel.
A gradual rise in renewable energy production could also limit the economic damage from a jump in crude prices. But experts note that fossil fuels like oil continue to provide the vast majority of energy that drives industry, transportation and heating, among other things.
Updated January 3 with context and quotes from Head of Petroleum Analysis at Gasbuddy Patrick Dehaan.
A big-screen adaptation of the anime “Chainsaw Man” has topped the North American box office, beating a Springsteen biopic and “Black Phone 2.” The movie earned $17.25 million in the U.S. and Canada this weekend. “Black Phone 2” fell to second place with $13 million. Two new releases, the rom-com “Regretting You” and “Springsteen — Deliver Me From Nowhere,” earned $12.85 million and $9.1 million, respectively. “Chainsaw Man – The Movie: Reze Arc” is based on the manga series about a demon hunter. It's another win for Sony-owned Crunchyroll, which also released a “Demon Slayer” film last month that debuted to a record $70 million.
The Federal Aviation Administration says flights departing for Los Angeles International Airport were halted briefly due to a staffing shortage at a Southern California air traffic facility. The FAA issued a temporary ground stop at one of the world’s busiest airports on Sunday morning soon after U.S. Transportation Secretary Sean Duffy predicted that travelers would see more flights delayed as the nation’s air traffic controllers work without pay during the federal government shutdown. The hold on planes taking off for LAX lasted an hour and 45 minutes and didn't appear to cause continued problems. The FAA said staffing shortages also delayed planes headed to Washington, Chicago and Newark, New Jersey on Sunday.
Boeing workers at three Midwest plants where military aircraft and weapons are developed have voted to reject the company’s latest contract offer and to continue a strike that started almost three months ago. The strike by about 3,200 machinists at the plants in the Missouri cities of St. Louis and St. Charles, and in Mascoutah, Illinois, is smaller in scale than a walkout last year by 33,000 Boeing workers who assemble commercial jetliners. The president of the International Association of Machinists says Sunday's outcome shows Boeing hasn't adequately addressed wages and retirement benefits. Boeing says Sunday's vote was close with 51% of union members opposing the revised offer.
The stunning indictment that led to the arrest of more than 30 people — including Miami Heat guard Terry Rozier and other NBA figures — has drawn new scrutiny of the booming business of sports betting in the U.S. The multibillion-dollar industry has made it easy for sports fans — and even some players — to wager on everything from the outcome of games to that of a single play with just a few taps of a cellphone. But regulating the rapidly-growing industry has proven to be a challenge. Professional sports leagues’ own role in promoting gambling has also raised eyebrows.
Tesla, the car company run by Elon Musk, reported Wednesday that it sold more vehicles in the past three months after boycotts hit hard earlier this year, but profits still fell sharply. Third-quarter earnings fell to $1.4 billion, from $2.2 billion a year earlier. Excluding charges, per share profit of 50 cents came in below analysts' estimate. Tesla shares fell 3.5% in after-hours trading. Musk said the company's robotaxi service, which is available in Austin, Texas, and San Francisco, will roll out to as many as 10 other metro areas by the end of the year.
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