The price of oil touched a threshold on Thursday that it had not crossed in months, a direct consequence of the widening war with Iran, ABC7 reports. For Angelenos, the number that matters is the one on the gas-station sign.
The move
Brent crude futures, the global benchmark, briefly topped $100 a barrel on Thursday morning before slipping back to $99.70. That is roughly a 28 percent jump over the past month and the highest level since May 26. Markets took it badly: the Dow fell 375 points, about 0.7 percent, with the S&P 500 down 0.7 percent and the Nasdaq off 1.4 percent.
What is pushing it up
Three pressures, all tied to the same conflict, are behind the spike. Houthi militants in Yemen claimed to have struck two Saudi tankers in the Red Sea. The United States and Iran have continued trading strikes. And, most consequentially for the oil market, the U.S. resumed a naval blockade of the Strait of Hormuz last week.
That last point is the one to understand. The Strait of Hormuz is the narrow waterway through which roughly one-fifth of the world's oil is shipped. When traffic there is disrupted, and shipping has dropped sharply as the war escalated, the price of oil everywhere responds, regardless of where the oil itself comes from. A blockade of a single chokepoint on the far side of the world lands, within days, on a fuel pump in Los Angeles.
The price at the pump
The national average for gasoline reached $4.09 a gallon, according to AAA, after crossing $4 earlier in the week. California prices, as ever, run well above the national figure, which means Southern California drivers are feeling this faster and harder than most of the country.
This is the mechanism by which a distant war becomes a household expense. Higher crude prices flow into gasoline, diesel and jet fuel, and from there into the cost of nearly everything that moves by truck, which in a car-and-freight economy like Southern California's is nearly everything.
The context that could cut either way
There is a reason prices had been low before this: a preliminary peace agreement earlier in the war had briefly pushed oil to its lowest levels since before the fighting broke out in late February. The recent return to large-scale combat has endangered that deal and reversed the relief.
That cuts both ways for what comes next. Because this spike is driven by the war rather than by supply-and-demand fundamentals, it could ease quickly if the fighting stops or the strait reopens, or climb further if it does not. Oil above $100 is not, on this evidence, a permanent new normal; it is a live readout of the war. The Herald will track both the price and the conflict driving it.
