Oil Continues to Rise Amid Structural Damage to Middle East Supplies and Diminishing Prospects for a Settlement

(MENAFN- Your Mind Media ) Crude oil prices are rising by more than 3 percent today in both West Texas Intermediate and Brent crude, while remaining near their highest levels in four months.
The rise in oil prices comes as structural damage to oil production infrastructure expands in light of uncalculated escalation, amid an absence of signs regarding the possibility of reaching a settlement that prevents the situation from deteriorating at least in the near term.
We previously spoke about the dominance of a gray situation based on neither war nor peace in the region. However, we pointed out that even a state of no war without reaching an agreement carries high risks of returning to target oil and gas production and export facilities in the region. The strikes that previously appeared limited between Iran and the United States on one side, and Saudi Arabia and the Houthis in Yemen on the other side, were the beginning of a snowball effect that ultimately led to the continued targeting of ships in the Strait of Hormuz.
Additionally, there is the potential interruption of nearly 4 percent of global oil exports flowing from Saudi Arabia as a result of targeting the East West pipeline that empties into the port of Yanbu on the Red Sea. Reuters also reported, citing experts and insiders, that repairing the vital pipeline could take anywhere from days and weeks to even months, while inventories intended for export from the Red Sea may only last for seven days at most. This also coincided with the Houthis expanding their control over the western coast of Yemen, tightening their grip on the Bab al Mandab Strait, according to the Wall Street Journal.
Worsening conditions further, we saw a cooling of diplomatic efforts at the regional level to reach an interim agreement regarding the Strait of Hormuz that would limit incidents targeting tankers passing through the strait. This comes at a time when military action against Iran has failed to decisively prevent it from targeting ships, as the United Kingdom Maritime Trade Operations reported that a ship was targeted yesterday, causing a fire to break out on its deck.
All these factors contributed to fueling increases in refined fuel prices, as the national average diesel price in the United States exceeded 6.2 dollars per gallon, a level we have never seen before, representing an increase of nearly 70 percent compared to the average a year ago, according to American Automobile Association AAA figures. These factors also contribute to keeping Treasury bond yields high and hovering near their highest levels in years. This situation leads the market to price in a 90 percent chance that the Federal Reserve will raise interest rates by a quarter of a percentage point at its meeting this week, and a 75 percent probability that this year will end with a half percentage point rate hike, according to CME FedWatch figures.
Based on this, I believe it would be a risky political gamble for President Donald Trump and his Republican Party to go into the midterm elections in an environment shaped by high inflation numbers and borrowing costs, at a time when the president has been unable to resolve this unpopular war either militarily or diplomatically. Trump may attempt to show Iran in the weakest possible position before heading into the elections to justify this war. Based on the above, I do not rule out a move toward refraining from escalation in the coming days and a return of talk about diplomatic efforts in an attempt to limit the political cost of this war. Crude prices may subsequently tend to trim their gains following increases that may not stop today, ultimately keeping them within a very wide sideways range as we previously noted.

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