Crude climbs to multi-month highs
Oil prices surged in early trading Tuesday as energy markets adjusted to what NBC News described as a new normal in the Middle East. U.S. crude rose as much as 5% to about $109 a barrel, its highest price since April. International benchmark Brent crude gained 1.5% to more than $111, its highest since May.
Prices later retreated. According to NBC News, weaker-than-expected U.S. housing starts raised the prospect of a broader economic slowdown and lower demand for fuel.
Futures for delivery next year also reached record highs. Deutsche Bank analysts said in a note Tuesday that this implies "an extended period of high oil prices deep into 2027." Peter Boockvar, chief investment officer of OnePoint BFG Wealth Partners, wrote that the 2027 contracts are rising as the possible reality of "higher for longer" oil prices sinks in.
Shipping risks in the Strait of Hormuz
Several factors drove the increase. Data shows the cost of chartering a large tanker to carry oil through the Strait of Hormuz has quadrupled since September. NBC News reported that much of the jump is a risk premium covering both sailors and insurance.
The ship-tracking group Kpler said in a Monday note that at least 18 vessels have been attacked in the strait over the past two weeks. The higher transport costs have begun to offset a recent increase in supply from a growing number of ships passing through the waterway.
Deutsche Bank analysts also said the Iranian attacks on ships have fueled investor speculation that the Trump administration will be more likely to escalate against Iran after the midterms.
Regional tensions widen
Iran-aligned Houthi rebels claimed Monday that they had struck airport, energy and military targets in Saudi Arabia, along with a training camp in Yemen for the Yemeni government's security forces.
The U.K. will begin deploying fighter jets over Saudi Arabia to help protect against further Houthi attacks, the British Defense Ministry said Tuesday. NBC News reported that another country's military entering the regional hostilities was taken as a further sign of escalating tensions.
Gas prices and the midterms
U.S. gasoline prices had begun the week lower. The national average for unleaded stood at $4.28 a gallon and was on pace to reach its lowest level in a month. NBC News said that trend is likely to be upended as higher crude prices reach the pump.
Gas prices have become a major issue for voters in the midterms, where Republicans face dwindling odds of keeping control of Congress, according to NBC News. A recent NBC News poll found that 67% of U.S. adults consider gas prices a "very serious" or "somewhat serious" problem. A majority also said current economic conditions have led them to change their spending habits.
