Oil prices rise after reports of US plans to strike Iran

World oil prices on October 8 rebounded after reports of a possible new US military operation against Iran. Quotes received additional support from a reduction in oil production in the Gulf of Mexico due to the approach of Hurricane "Isaias".

During trading, the benchmark Brent rose above $102 per barrel, while the American West Texas Intermediate (WTI) traded near $90.

A new factor for the oil market was the report that the Pentagon was preparing options for strikes on Iran that could be delivered before the midterm US Congressional elections on November 3.

According to The Atlantic, citing two representatives of the US administration, the White House instructed the military to develop possible scenarios for an operation. At the same time, no final decision on conducting strikes has been made, and their scale and potential targets remain subject to discussion.

The preparation of military plans is being handled by the US Central Command (CENTCOM). One option involves a limited operation before the elections with the possibility of larger-scale strikes after the vote.

According to the publication, Donald Trump seeks to achieve lower gasoline prices and demonstrate results of the confrontation with Tehran before the elections. However, even supporters of the military scenario admit that limited strikes alone are unlikely to ensure the restoration of safe navigation through the Strait of Hormuz or a rapid reduction in fuel prices.

For the oil market, reports of a possible resumption of large-scale hostilities create additional uncertainty about the stability of supplies from the Middle East.

The second factor in the price increase was the reduction in oil production in the Gulf of Mexico due to Hurricane "Isaias". American oil companies temporarily halted production of more than 511 thousand barrels per day, which is approximately a quarter of production in the region.

According to the US Marine Minerals Administration, as of October 7, 25.08% of current oil production and 16.37% of natural gas production in the Gulf of Mexico had been shut in.

Due to the approach of the storm, operators evacuated personnel from eight production platforms and two drilling rigs. The hurricane is expected to approach the northern coast of the Gulf of Mexico on the evening of October 9.

The American regulator notes that shutting in production is a standard precautionary measure. After the hurricane passes, companies will inspect equipment and resume operation of undamaged facilities. If infrastructure is damaged, returning to normal production volumes may take longer.

Thus, the oil market is simultaneously reacting to two supply risks: a possible escalation of war in the Middle East and the actual temporary reduction in production in the US. Further price dynamics will depend on the development of the situation around Iran and the consequences of the hurricane for American oil infrastructure.

Sources: Bloomberg, The Atlantic, Marine Minerals Administration