Oil prices jump 4% on rising Middle East tension

US orders partial evacuation of embassy in Iraq

Oil prices jumped on Thursday after the US was preparing to evacuate non-essential staff from its Iraq embassy due to rising regional tension. Reuters

Oil prices rose more than 4 per cent on Wednesday as the US was preparing to evacuate non-essential staff from its embassy in Baghdad amid rising regional tension.

Brent crude futures rose $1.96, or 3.02 per cent, to $66.82 per barrel. West Texas Intermediate crude gained $2.93, or 4.51 per cent, to $67.90 per barrel at 4pm ET.

“It's so fragile. If you see any aberration like that, it doesn't surprise me at all you see volatility in oil prices,” said Peter Andersen, founder of Andersen Capital Management in Boston.

The US State Department said it was preparing to evacuate non-essential staff in its embassy in Iraq, Opec's second-largest producer of crude oil behind Saudi Arabia.

Non-essential staff members and family members were also authorised to leave Bahrain and Kuwait, according to reports.

Tension in the region flared up on Wednesday as efforts between the US and Iran to reach a nuclear deal appeared to stall.

In an interview with the New York Post published on Wednesday, President Donald Trump said he was getting “less confident” about the prospects of a deal being reached. Mr Trump had previously expressed hope that the two sides could reach a deal, and a sixth round of talks were scheduled to take place in Oman on Thursday.

“Something happened to them, but I am much less confident of a deal being made,” he told the Post. Mr Trump added Tehran will not have a “new nuclear weapon” regardless if a deal is reached.

Matthew Bey, a senior global analyst at the Rane Network in Austin, said Mr Trump's comments are “only reinforcing fears that nuclear talks may soon fall apart”.

“The likelihood of a US-Iran nuclear deal, even a temporary one, has declined in recent days as the White House has hardened its demand on Iran having to give up the right to enrich uranium and Iran has demonstrated little willingness to do so,” Mr Bey told The National in an email.

Iran's Minister of Defence Aziz Nasirzadeh had also said on Wednesday that Tehran will strike US bases in the Middle East if nuclear talks fail and conflict arises.

Major indexes on Wall Street wavered aftedr developments in the region, as investors continued to assess the prospects of a US-China trade truce and tame inflation data.

The Dow Jones Industrial Average was virtually flat, losing 1.1 points at the closing bell. The S&P 500 and Nasdaq Composite both closed 0.27 and 0.50 per cent lower, respectively.

“Given such uncertainty in the markets right now we tend to defer being negative when we can't understand this stuff. There's a handshake deal, but it's a long way off from an actual deal,” Mr Andersen said.