Brent Ends Week Up 7.6% as U.S. Strikes Three Iranian Tankers
Markets are closed. It is Sunday, and Monday is the Labor Day holiday, so New York does not trade again until Tuesday, September 8 at 9:30 a.m. ET (4:30 p.m. in Istanbul) — and the U.S.-Iran conflict escalated over the weekend, with none of it priced in yet.
U.S. Central Command struck three Iranian oil tankers on Saturday: one off Kharg Island in the Persian Gulf, one in the Gulf of Oman that its crew abandoned, and one near Jask. Admiral Brad Cooper said the strikes were retaliation after the Islamic Revolutionary Guard Corps fired two ballistic missiles at two American warships — "If you shoot at two of our ships, we will impose an even higher economic cost." Iran's foreign ministry called the strikes a violation of international law and a war crime, and on Sunday said it had targeted an unmanned U.S. vessel entering the Strait of Hormuz; U.S. officials have not confirmed that.
The price response came in Friday's session: Brent settled up 0.8% at $96.28 and WTI up 0.2% at $91.48, leaving Brent 7.6% higher on the week and WTI up nearly 10% — the strongest week since mid-July. The mechanism is throughput, not lost supply: only four commodity vessels transited the Strait of Hormuz on Thursday against a 10-day average near 15, and the average U.S. diesel price hit a record $5.85 a gallon, according to AAA.
Rates are the second story. August nonfarm payrolls came in Friday at 162,000, far above forecasts, and futures pricing for a 25 basis point hike at the September 15-16 FOMC meeting moved to roughly 65% from about 50% before the release; the policy rate stands at 3.50%-3.75%. Fed Chair Kevin Warsh used his August 28 Jackson Hole speech to reaffirm PCE as the fixed gauge for the 2% target and said the Fed is prepared to tighten if progress stalls; core PCE ran at 3.34% year over year in July.
