Investors are benefiting from the rising oil prices and stronger-than-expected economy, while seeking to protect their investment portfolios from the potential impact of inflation resurgence. As a result, U.S. energy stocks are surging.
At the same time, as Israel prepares to respond to potential attacks from Iran, oil prices are increasing. The attack is expected to occur within the next 48 hours. Brent crude oil prices surged 2.7% to above $92 per barrel, then retraced slightly to close above $90 per barrel. U.S. benchmark West Texas Intermediate crude rose by 3.1%, but the gains later diminished.
Rebecca Babin, a senior energy trader at CIBC Private Wealth, remarked, “Iran’s potential actions against Israel have increased the likelihood of disruptions in Middle Eastern crude oil supplies, causing many traders to continue holding long positions in crude oil and crude oil call options. Heading into a weekend with significant headline risk, there are few sellers willing to step in and sell the rally.”
Due to Middle East turmoil boosting the market formed by supply constraints and stronger-than-expected demand, West Texas Intermediate crude oil has risen by approximately 19% this year. The escalating geopolitical tensions have spurred bullish activities in the oil options market. In recent days, the buying volume for call options has increased.
Economist Tim Snyder from Matador Economics stated that ongoing Iranian threats to close the Suez Canal continue to pose the greatest risk premium due to supply chain issues.
Peter Tuz, President of Chase Investment Counsel Corp, mentioned, “Investors are looking globally and finding that the economy is not slowing down significantly… At this time, there are various concerns about supply bottlenecks, especially in oil.”
