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(Bloomberg) — Oil fluctuated as the market remained on alert for whether President Donald Trump will plunge the US into the conflict between Israel and Iran.
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Brent traded near $77 a barrel after a slight uptick on Wednesday. Oil prices are markedly higher than where they were before the attacks began, with volatility spiking, options getting more bullish and premiums for nearby crude prices soaring over later ones.
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Senior US officials are preparing for the possibility of a strike on Iran in the coming days, but the situation is still evolving and could change, according to people familiar with the matter. Trump concluded a meeting Wednesday with top advisers, but the White House offered few clues about the path forward.
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Asked during the day if he was moving closer to bombing Iran, Trump said “I may do it. I may not do it.” The Wall Street Journal reported that the president approved a military attack plan earlier in the week, but withheld the final authorization as he weighed whether Tehran would meet his demands.
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The biggest concern for the oil market centers on the Strait of Hormuz, but so far there are no signs that Tehran is seeking to disrupt shipping through the narrow waterway at the entrance to the Persian Gulf. About a fifth of the world’s crude output passes through the strait.
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“We don’t see it as a likely scenario at this time, but given the precarious state that the Iran regime is in right now, I think everybody should be watching” the waterway, Mike Sommers, the president of the American Petroleum Institute, said in a Bloomberg television interview.
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Goldman Sachs Group Inc. sees a geopolitical risk premium of around $10 a barrel for Brent due to the conflict, according to a note from analysts including Daan Struyven. However, the bank said its base-case scenario was oil falling to $60 in the fourth quarter, assuming there are no supply disruptions.
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Shell Plc warned Thursady that any blocking of Hormuz would have a huge impact on global trade. The company has contingency plans in place in the event that things deteriorate, Chief Executive Officer Wael Sawan said at the Japan Energy Summit & Exhibition in Tokyo.
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“Intraday volatility remains high,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “Market sentiment is expected to remain highly nervous as we head into the weekend. We estimate that there is currently a risk premium of approximately $8 priced in.”
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—With assistance from Yongchang Chin.
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