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Oil prices rise as Iran strikes US-led forces in Iraq

Syrian demonstrators burn the US flag as they gather in the central Saadallah al-Jabiri square in the northern Syrian city of Aleppo on January 7, 2020, to mourn and condemn the death of Iranian military commander Qasem Soleimani, and nine others in a US air strike in Baghdad. (Photo by - / AFP) (Photo by -/AFP via Getty Images)
Demonstrators burn the US flag in Syria as protests swept several countries over the US killing of senior Iranian general Qasem Soleimani. Photo: AFP via Getty Images

Oil prices rose again on Wednesday after an Iranian missile attack on US-led forces in Iraq, as the country hit back following the US killing of a senior Iranian general.

The price of crude oil (CL=F) rose 0.8% to $63.22 a barrel, while the price of brent crude (BZ=F) rose 1.1% to $69.02 a barrel at around 8.10am in London.

Stock markets also slipped globally after news broke about the strike, with uncertainty over how the US is likely to respond to the attack.

Iranian state TV reported 15 missiles had been launched at US targets, with the country’s supreme leader Ali Khamenei calling it a “slap on the face” and demanding US troops leave the region.

US officials said at least two Iraqi facilities were hit in the attack at around 10.30pm on Tuesday night.

READ MORE: What the Iran crisis could mean for UK petrol prices

US president Donald Trump tweeted “all is well” after the attack, saying an assessment of casualties and damage was underway. He added: “So far, so good!”

He said a further statement would be made on Wednesday morning US time.

The rise in the price of crude oil reflects concerns about further heightening of tensions and fears of disruption to global supplies.

Sebastien Galy, a senior macro strategist at Nordea Asset Management, said: “The US has a choice of continuing this and running out of luck without any ability to win this conflict or call it a day and return to the occasional tit for tat.

“What it will likely do now is tighten very sharply sanctions against Iran with the help of its allies.”

But Khamenei told a crowd of Iranians that the strikes “concluded” its response to the US killing of Qasem Soleimani on Friday, and said he did not want a war, Reuters reports.

Marc-André Fongern, head of FX Research at MAF Global Forex, said the Iranian government did not appear to be aiming for further escalation “for the time being.”

But he said he expected oil prices to rise steadily in 2020, as the deterioration in US-Iranian relations could have “far-reaching consequences” which he believed had not been adequately priced in.

Deutsche Bank analysts said in a note that stock markets, like the oil price, had already recovered much of the losses that immediately followed the attack.

“The price action in the financial markets post the attack also gave a feeler that markets might not be expecting an all-out confrontation, with the futures on the S&P 500 paring losses to -0.35% after being down as much as -1.7% immediately after the attack,” they wrote.