US President Donald Trump said on Wednesday that soaring oil prices triggered by the war with Iran were unlikely to fall substantially until after the US midterm elections, as the seven-month conflict continued to send shockwaves through global energy markets. Speaking to reporters before travelling to Dallas for the Republican midterm convention, Trump predicted that crude prices would begin falling after the elections but acknowledged that the process could take longer.
“Right after the election, oil prices are going to be tumbling downward,” Trump said, before adding, “I think it’s going to take a little bit longer than the midterm.” He also predicted that the war itself would end soon after the elections because Iran would no longer be able to sustain the conflict. “I think the war’s going to end immediately after the election because they can’t hold out any longer,” he said. The assessment marks a significant shift from Trump’s prediction at the beginning of the conflict that the war would last only a matter of weeks.
Brent crude breaches $100
Oil markets surged again on Wednesday as the military confrontation intensified. International benchmark Brent crude jumped more than 3 per cent and crossed $100 a barrel for the first time since July, while US benchmark crude gained 2.4 per cent to $95.25 a barrel. The renewed spike reflected growing concerns over threats to oil production, shipping and energy infrastructure across West Asia.
Markets reacted after the US military said it had struck five Iranian tankers in response to attempted missile attacks on a US Navy warship. Fresh attacks by Iran-backed Houthi rebels also ignited fires at oil facilities in Saudi Arabia, adding to concerns that the conflict could further disrupt supplies from one of the world’s most important oil-producing regions.
US fuel costs surge
The impact is increasingly being felt by American consumers. The average price of regular petrol in the US climbed seven cents overnight to $4.22 a gallon, more than a dollar higher than at the same point last year, according to AAA. Diesel prices have risen even more sharply, reaching $5.94 a gallon after hitting an all-time high last Friday.
Higher diesel prices carry wider inflationary risks because the fuel is extensively used in freight transport, agriculture and industrial production. Rising transportation costs can feed through to the prices of food and consumer goods, making energy inflation an increasingly important economic and political issue ahead of the midterm elections.
Airlines cut flights as costs soar
The energy shock has also spread to aviation, with jet fuel becoming sufficiently expensive to force US and international airlines to reduce flights while increasing fares and fees. Continued escalation could put further pressure on carriers and other fuel-intensive industries while complicating efforts to contain inflation.
Trump’s comments effectively tie expectations of relief in energy markets to the trajectory of a war that has already lasted far longer than initially predicted. With attacks now affecting tankers, military assets and Saudi oil infrastructure, the course of the conflict — and its impact on global fuel prices — is increasingly becoming intertwined with the approaching US midterm elections.