Oil prices jumped more than Sh300 ($3) after a US airstrike in Baghdad ordered by President Donald Trump killed the head of Iran's elite Quds Force, sparking concerns for an escalation of regional tensions and disruption to crude supplies.
Brent crude rose as high as $69.50 a barrel, its highest since mid-September when Saudi oil facilities were attacked, and was up 4.2 per cent or Sh300 ($2.83) a barrel at Sh70,000 ($69.08) by yesterday morning.
West Texas Intermediate (WTI) crude was up $2.53 or 4.1 per cent at $63.71 a barrel, having earlier spiked to $64.09 a barrel, its highest since April 2019.
An airstrike at the Baghdad Airport early yesterday killed Major-General Qassem Soleimani, the architect of Iran's spreading military influence in the Middle East and a hero among many Iranians and Shi'ites in the region.
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Iran's Supreme Leader Ayatollah Ali Khamenei said harsh revenge awaited the "criminals" who killed Soleimani.
"We expect moderate to low-level clashes to last for at least a month and likely be confined to Iraq," Eurasia's Iran analyst Henry Rome said.
"Iran will also likely resume harassment of commercial shipping in the Gulf, and may launch military exercises to temporarily disrupt shipping," he said.
The US embassy in Baghdad yesterday urged all citizens to leave Iraq immediately. Dozens of US citizens working for foreign oil firms in the Iraqi oil city of Basra were preparing to leave the country yesterday.
All oilfields across the country were operating normally and production and exports were not affected, Iraq's Oil Ministry said in a statement. It said no other nationalities were departing.
"With further escalation remaining a distinct possibility, we could see markets retain at least some risk premium," JBC Energy, an oil and gas research firm, said in a note.
Soleimani's Quds Force and its paramilitary proxies in Iraq, Lebanon and Yemen have ample means to mount a multi-pronged response.
In September, US officials blamed Iran for a missile and drone attack on oil installations of Aramco, the Saudi State energy giant and world's largest oil exporter.
Meanwhile, Russia has halted oil supplies to refineries in Belarus amid a contract dispute that threaten large Russian oil deliveries to Europe.
