Iran ‘ready for war’ as oil prices surge

Iran says that it is prepared for “fully fledged war” after Donald Trump’s administration accused it of launching drone attacks on two oil facilities in Saudi Arabia.

Responsibility for the attacks has been claimed by Yemen’s Iranian-aligned Houthi rebels but Mike Pompeo, the US Secretary of State, insists that Iran is to blame. In response, Tehran accused the US of “deceit” and making “blind accusations”.

The BBC says that the attacks “destabilise an already volatile region” and the ramifications could be huge.

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The Times goes further, saying the dispute leaves the two powers “at their closest point to all-out conflict” since the White House reinstated sanctions last year and has “overturned hopes that the dismissal of John Bolton, the hawkish US national security adviser, might ease tensions”.

Writing on Twitter, Trump was in a bullish mood, insisting that the US knew who the culprit was and was “locked and loaded” but waiting to hear from the Saudi “Kingdom” on what it wanted to happen next. CNN said the president's tweet “appeared to raise the spectre of a US military response”.

Robert McNally, an energy analyst, told the New York Times that the oil facility attacks were more than “likely to put on ice” the possibility of talks between the US and Iran, which had seemed more possible after the departure of Bolton.

Meanwhile, oil prices have surged, hitting their highest in four months after the strikes destroyed more than 5% of global supply. Brent crude leapt 19% to $71.95 a barrel, while the other major benchmark, West Texas Intermediate, rose 15% to $63.34.

Abhishek Kumar, head of analytics at Interfax Energy in London, told the BBC: “The damage to facilities at Abqaiq and Khurais appears to be extensive, and it may be weeks before oil supplies are normalised.”

Although the Saudis are expected to draw on reserves in a bid to keep business as usual, Michael Tran, managing director of energy strategy at RBC Capital Markets in New York, said there has been a paradigm shift.

“Even if the outage normalises quickly, the threat of sidelining nearly 6% of global oil production is no longer a hypothetical, a black swan or a fat tail. Welcome back, risk premium,” he said.

Trump says he had authorised the use of oil from the US's emergency reserve. Market analysts have forecast that prices could reach $100 per barrel this week if normal production is not quickly resumed.