MARKET NEWS

(Bloomberg) -- Oil surged for a second day as the US and Israel stepped up their war against Iran, with the sprawling conflict’s impact on energy assets in the Persian Gulf deepening.

US oil futures surged as much as 9.5% after Iraq cut output at the giant Rumaila oil field and appears poised to shutter about 3 million barrels a day of output if the crisis persists, according to people familiar. Storage at the fields has been tightened because of disruptions in the Strait of Hormuz, a key shipping route, underscoring how export bottlenecks are translating into tangible supply losses.

Saudi Arabia, for its part, is exploring the option of delivering more barrels from the Red Sea, with very few ships currently transiting the Strait of Hormuz, which handles about a fifth of the world’s oil. The Red Sea is far from risk-free, with Yemen’s Iran-backed Houthi militant group threatening to resume attacks on vessels in the waterway.

The fallout for energy markets has sent global benchmark Brent crude jumping as much as 18% in just two days, surpassing $85 a barrel for the first time since July 2024 on Tuesday. The rally was tempered after an International Energy Agency document showed the body is ready to help stabilize the global oil market in the wake of the conflict.

The commodity also pared some gains on Tuesday after Reuters reported that US President Donald Trump will review policy options aimed at taming energy prices, including a proposal to help ships transiting conflict zones obtain insurance. Market participants have been speculating about potential US measures to keep gasoline prices low, one of Trump’s campaign pledges.

He told reporters at the White House that oil prices are a “little high,” “but as soon as this ends, those prices are going to drop.”

Rising energy prices are already casting a pall over economic growth prospects and the ability of central banks to keep inflation in check.

Earlier, a person familiar with the situation said the Trump administration had no immediate plan to tap the nation’s emergency crude holdings. Any move to release oil from Strategic Petroleum Reserve would likely be coordinated with nations that belong to the International Energy Agency.

“With the Strait of Hormuz still inactive, the clock is ticking,” JPMorgan Chase & Co. analysts including Natasha Kaneva said in a note, flagging scope for some Persian Gulf producers to cut output within weeks if storage fills. For now, gains in prices “remain contained — despite the staggering geographic scope of the conflict and growing proximity to energy infrastructure — reflecting that a substantial risk premium is already priced,” they added.