Oil is Iran’s Weapon of Choice

In a Skandinaviska Enskilda Banken AB (SEB) report sent to Rigzone by the SEB team on Tuesday, SEB Chief Commodities Analyst Bjarne Schieldrop warned that “oil is Iran’s weapon of choice, and the U.S. gasoline pump is part of the battlefield”.

“Iran’s Revolutionary Guard Corps last evening declared the Strait of Hormuz for closed and that the military will set any ship on fire if it tries to pass the Strait,” Schieldrop noted in the report.

“Iran is also escalating its retaliatory strikes across the region. Yesterday it was mostly unclear what retaliatory path Iran would take. Would oil, oil installations, and the Strait of Hormuz be part of it or left alone? Now we know,” he added.

“Oil is Iran’s weapon of choice and it is aimed straight at President Trump’s Midterm elections. An important part of the battlefield for Iran is thus at the U.S. gasoline pump,” he continued.

Schieldrop warned in the report that Brent is now unavoidably heading to $100 per barrel and above “unless Trump finds some kind of offramp, or in other words backs down”.

“So far however, his response seems to be to double down. Extending the expected 4-5 weeks to instead ‘whatever it takes’. He is digging in. And while he is doing that, the U.S. retail gasoline prices shoot higher,” he added.

Schieldrop stated in the report that Iran may not be able to keep the Strait of Hormuz fully closed but added that “constant risk of strikes, and thus choking and reduced flow, will do plenty good to spike the oil price higher”.

Rigzone has contacted the White House and the Iranian Ministry of Foreign Affairs for comment on the SEB report. At the time of writing, neither have responded to Rigzone.

According to the AAA Fuel Prices website, the average regular gasoline price in the U.S. is $3.109 per gallon, as of March 3. Yesterday’s average was $2.997 per gallon, the week ago average was $2.951 per gallon, the month ago average was $2.883 per gallon, and the year ago average was $3.097 per gallon, the site showed.

In a blog posted on its website on March 2, GasBuddy noted that, according to its data, the U.S. average price of gasoline “has risen 5.6 cents over the last week and stands at $2.94 per gallon”.

“The national average is up 7.8 cents from a month ago and is 10.1 cents per gallon lower than a year ago,” GasBuddy added in the blog.

The company pointed out in the blog that the most common U.S. gas price encountered by motorists stood at $2.79 per gallon, which it said was up 10 cents from a week ago. GasBuddy stated in the blog that the median U.S. gas price is $2.79 per gallon, which it noted was up four cents from last week and about 15 cents lower than the national average.

“The national average price of gasoline has climbed for a fourth straight week, driven primarily by seasonal tightening and broader market dynamics,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in the blog.

“Looking ahead, markets will now begin reacting to this weekend’s U.S.-Iran attacks, which have elevated geopolitical risk premiums even in the absence of immediate supply disruption,” he added.

“Oil prices have firmed as traders assess the potential for further escalation, and while fundamentals such as inventories and refinery activity remain important anchors, the risk of broader instability – particularly involving key transit routes – has injected fresh uncertainty into energy markets,” he continued.

“In the week ahead, gasoline prices are likely to face heightened upward pressure as seasonal trends continue and markets navigate this evolving geopolitical landscape, with the national average poised to reach the $3 per gallon mark for the first time this year,” De Haan went on to state.

To contact the author, email andreas.exarheas@rigzone.com