Soleimani Killing Raises Fears of Reprisals on Oil Infrastructure; Crude prices rally after a U.S. airstrike kills Qassem Soleimani, leader of the foreign wing of Iran's Islamic Revolutionary Guard Corps
Friday, January 03, 2020, 6:51 AM ET
By David Hodari
Wall Street Journal
Crude prices shot higher Friday after a U.S. airstrike killed a high-ranking Iranian military leader , with traders fearful of retaliatory attacks from Tehran on Middle Eastern energy infrastructure.
Brent crude, the global benchmark, was up 4.9% at $69.43 a barrel on London's ICE Futures exchange, its highest level since the September drone attacks on key Saudi Arabian oil facilities. On the New York Mercantile Exchange , West Texas Intermediate futures rose 4.5% to $64.02 a barrel, their highest level since May.
Those sharp gains came after President Trump ordered a strike that killed Maj. Gen. Qassem Soleimani , leader of the foreign wing of Iran's Islamic Revolutionary Guard Corps. Iran's supreme leader, Ayatollah Ali Khamenei , declared three days of mourning for Mr. Soleimani's death and warned that a "hard revenge awaits criminals."
"The rhetoric is one of severe retaliation from Iran , and I'm expecting the market to drift higher as tensions continue to rise," said Edward Marshall, a commodities trader at investment firm Global Risk Management.
Given the history of conflict with U.S.-backed allies in the area—attacks on Saudi Arabia's facilities in September sparked large scale disruptions—Iran may respond to the attack by targeting regional energy infrastructure, analysts said.
"In terms of what this means for Saudi Arabia, they'll be extremely nervous today. They'd love to have Iran confronted but they won't want to be on the front line," said Charles Hollis, a former U.K. diplomat to Saudi Arabia and Iran, and managing director of geopolitical risk consulting firm Falanx Assynt.
"[For Iran], to attack a proxy nation after a direct attack from the U.S. is an easy option, but I'm almost certain the U.S. will have reinforced defenses there," Mr. Hollis added.
Washington and Riyadh have both accused Iran of being behind September's attacks on Saudi oil-processing facilities at Abqaiq and Khurais, as well as attacks on other Saudi energy infrastructure and oil tankers in and around the Strait of Hormuz. Tehran has denied many of those accusations.
Tensions between Washington and Tehran began rising in 2018, when the U.S. pulled out of a deal limiting Iran's nuclear program, opting instead to reintroduce sanctions on the country. Iran's oil exports have dropped sharply, throwing its economy into a tailspin.
With the recent tensions in Iraq, oil watchers are on alert for disruptions to the flow of supply from one of the region's most influential producers.
"If a conflict is fought in Iraq, given Iraq's role as the second largest [ Organization of the Petroleum Exporting Countries ] producer, and the amount of oil coming out of the country, the market will be very nervous for sure," said Giovanni Staunovo, commodity analyst at UBS 's Chief Investment Office.
Seasonally thin trading contributed to oil's sharp Friday gains, with many traders yet to return from holiday.
"There's lower liquidity in the market. We will have participants back at their desks on Monday and that's probably also why we've seen such a big increase in prices," Mr. Staunovo said.
Traders were also awaiting U.S. Department of Energy data, due later Friday, which could fuel oil's rally if crude stocks prove to be lower than forecast.
Write to David Hodari at
David.Hodari@dowjones.com
Soleimani Killing Raises Fears of Reprisals on Oil Infrastructure