Oil jumps after U.S. strike kills top Iranian commander in Iraq

Saket Sundria January 03, 2020

SINGAPORE (Bloomberg) - Oil spiked as tensions in the Middle East flared after a U.S. strike near Baghdad international airport killed a top Iranian general.

Futures in New York and London surged more than 4% after the attack. The strike killed Qassem Soleimani, the Iranian general who led the Revolutionary Guards’ Quds force, according to two people familiar with the matter. U.S. Defense Secretary Mark Esper said Thursday that America was ready to deploy more force in Iraq after an attack on its embassy in Baghdad this week.

The U.S. and Iran are already facing off over President Donald Trump’s crippling economic campaign against Tehran and suspected Iranian reprisals. Saudi Arabia’s energy facilities as well as foreign tankers in and around the Persian Gulf have been the target of several attacks over the past year -- a region that includes OPEC’s five biggest producers.

“I expect tensions in the region to now intensify,” said Howie Lee, a Singapore-based economist at Oversea-Chinese Banking Corp. “Going into an election year in the U.S., the maximum pressure campaign by President Trump on Iran may intensify further.”

Brent for March settlement climbed as much as $2.81, or 4.2%, to $69.06 a barrel on the London-based ICE Futures Europe Exchange as of 10:26 a.m. Singapore time. The contract climbed 25 cents to close at $66.25 on Thursday.

West Texas Intermediate for February delivery rose as much as $2.66, or 4.4%, to $63.84 a barrel on the New York Mercantile Exchange. The contract rose 12 cents to close at $61.18 on Thursday.

The strike escalates an already tense three-way situation between the U.S. and major oil producers Iran and Iraq. The U.S. embassy compound in Baghdad was stormed by protesters this week after a rare direct American assault on an Iran-backed militia in the country.

The two Middle East countries combined pumped more than 6.7 million barrels a day of oil last month, according to data compiled by Bloomberg, more than one-fifth of OPEC output.