Oil gains on report Trump may order Iran strikes before midterms

Brent oil prices surged above $101 a barrel and West Texas Intermediate approached $89 as a report emerged that the White House had tasked the Pentagon with drafting strike options against Iran prior to the November midterm elections. This contradicts the common belief that President Donald Trump would avoid escalating the conflict with Iran before the polls.

The potential scope and targets of these strikes remain uncertain, but the possibility of a limited operation followed by more significant action post-election has sparked debate. Meanwhile, tropical storm Isaias forced Gulf of Mexico producers to suspend over 510,000 barrels of crude output, roughly a quarter of the region's supply.

The storm is expected to intensify into a Category 2 hurricane. Oil prices have been climbing due to heightened tensions between the US and Iran, which has disrupted exports and depleted energy inventories, contributing to global inflation. Despite increased Middle Eastern exports, vessel attacks have surged, with a recent incident involving a tanker strike off Qatar.

US Central Command reported 20 million barrels of crude flowing through the Strait of Hormuz, surpassing pre-conflict levels. Saul Kavonic, an energy analyst, noted that while Middle East flows have recovered, supply constraints, high logistics costs, and the risk of Iranian escalation are keeping prices high. The region faces additional risks, including Iranian-backed Houthi attacks on Saudi airports and Saudi-led coalition retaliation against targets in Yemen.

These factors, combined with the rising demand for crude from distant loading points, are driving a freight rally, significantly increasing transportation costs. In the US, total crude and products exports reached their highest level since May, signaling robust overseas demand.