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Iranians set a US and an Israeli flag on fire during a funeral procession organised to mourn the slain military commander Qasem Soleimani, Iraqi paramilitary chief Abu Mahdi al-Muhandis and other victims of a US attack in the capital Tehran. -AFP
Iranians set a US and an Israeli flag on fire during a funeral procession organised to mourn the slain military commander Qasem Soleimani, Iraqi paramilitary chief Abu Mahdi al-Muhandis and other victims of a US attack in the capital Tehran. -AFP

LONDON: Oil prices jumped by about 1 per cent on Monday, pushing Brent above US$70 a barrel, as rhetoric from the United States, Iran and Iraq fanned tensions in the Middle East after a US air strike killed a top Iranian military commander.

Brent crude futures soared to a high of US$70.74 a barrel and was at US$69.36 by 1502 GMT, up 76 cents from Friday’s settlement.

US West Texas Intermediate crude was up 54 cents at US$63.59 a barrel after touching US$64.72, its highest since April.

The gains extended Friday’s more than 3 per cent advance after a US air strike in Iraq killed Iranian military commander Qassem Soleimani, heightening concerns about an escalation in conflict in the Middle East and the possible impact on oil supplies.

The region accounts for nearly half of the world’s oil production, with a fifth of the world’s oil shipments passing through the Strait of Hormuz.

Brent crude futures soared to a high of US$70.74 a barrel and was at US$69.36 by 1502 GMT, up 76 cents from Friday’s settlement. - Reuters
Brent crude futures soared to a high of US$70.74 a barrel and was at US$69.36 by 1502 GMT, up 76 cents from Friday’s settlement. - Reuters

US President Donald Trump on Sunday threatened to impose sanctions on Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), if US troops were forced to withdraw from the country.

Baghdad earlier called on US and other foreign troops to leave Iraq.

Trump also said that the United States would retaliate against Iran if Tehran were to strike back after the killing.

“The situation brings lots of uncertainty and geopolitical tea-leaf reading on reactions. While the closure of the Strait of Hormuz remains a very unlikely event, the deterioration in Iraq bears supply risks,” said Norbert Rucker, head of economics at Swiss bank Julius Baer.

A handout picture provided by the office of Iran's Supreme Leader Ayatollah Ali Khamenei on January 6, 2020 shows Iranian mourners taking part in a funeral procession in Tehran for slain Iranian general Qasem Soleimani. -AFP/HO/KHAMENEI.IR
A handout picture provided by the office of Iran's Supreme Leader Ayatollah Ali Khamenei on January 6, 2020 shows Iranian mourners taking part in a funeral procession in Tehran for slain Iranian general Qasem Soleimani. -AFP/HO/KHAMENEI.IR

“Geopolitics tend to be a temporary force on oil markets and we believe this time is no different. We raise our near-term forecast to US$65 per barrel and maintain a neutral view.”

The Economist Intelligence Unit raised its first-quarter projection for Brent by US$5 to US$70 a barrel, assessing that Iran is likely to want to avoid open conflict.

“We maintain our forecast that the two countries are likely to avoid outright war. Iran is not in a position financially, after more than a year of crippling US sanctions, to finance a lopsided war with the US,” EIU global economist Cailin Birch wrote in a note.

In the United States, crude stocks fell by their most since June as exports exceeded 4 million barrels per day for the first time in history, the Energy Information Administration said on Friday. - Reuters

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