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Oil prices moved up and down on Tuesday as energy markets weighed fresh Middle East unrest against weaker-than-expected economic data.
After jumping as much as 5%, US crude prices closed down 2%, at less than $102 a barrel. International Brent crude prices ranged from a low of around $105 per barrel to a high of nearly $112.
Initially, there were several factors that pushed up the cost of crude, which later gave way to forces that pushed them lower. In the past two weeks, at least 18 ships have been attacked in the strait, the ship tracking group Kpler said in a report on Monday.
The cost of chartering a large tanker to transport oil through the Strait of Hormuz has now quadrupled since September as a result. Much of that increase is a risk premium that covers the price of increased safety for the ship’s crew, and the cost of insurance.
These higher transportation costs have overshadowed the recent bump in supply from a growing number of ships moving through the strait, which would otherwise help push prices back down.
Iranian attacks on ships have also led to investor speculation that the Trump administration is more likely to escalate against Iran after the November midterm elections.
For a brief moment, conflicting reports on Tuesday about whether the United States and Iran were engaged in active negotiations to de-escalate the conflict rocked energy markets, sending prices lower.
Rumors of an imminent deal spread online at noon, but an unnamed Arab diplomat later told Bloomberg News that this was “false.” A top Iranian official also said that his country is not proposing anything new to the United States or its intermediaries.
Investors were quick to send oil prices lower when there was any talk of a deal that would ease tensions in the region.
Even sending the price of oil tumbling Tuesday was fresh housing data.
Permits for future home construction fell to a near four-year low last month, while US pending home sales fell 7%. This raised the prospect for retailers of a broader economic slowdown and a decline in consumer demand.
“The ongoing contraction in the housing sector is set to deepen with 30-year mortgage rates now reaching 7.5%,” analysts with Citi said in a note Tuesday.
Rising costs — especially high gas prices — have become a major issue for voters in the midterms, where Republicans have dwindling chances to maintain their control of Congress.
A recent NBC News poll found that 67% of US adults believe gas prices are a “very serious” or “somewhat serious” problem. A majority also said that current economic conditions have caused them to change their spending habits.
US gasoline prices started the week lower, at $4.28 per gallon. At this rate, the national average price of unleaded could go to its lowest level in a month.
