Tension between the United States and Iran sent oil markets on a rollercoaster ride over the last week. Crude oil jumped more than 3% the day President Donald Trump ordered a drone strike against Revolutionary Guard Gen. Qassem Soleimani, the country’s top military leader. Oil spiked again after Iran retaliated, firing rockets at Iraqi military bases where U.S. soldiers are stationed. Oil prices eased after it became clearer that war between Iran and the U.S. was not as likely as it initially appeared.
Iran doesn’t sell much crude oil to American refineries because of U.S. sanctions. However, Iran’s position near large oil producers like Kuwait, Saudi Arabia, United Arab Emirates and Qatar means violence in the region could significantly disrupt production. Until this week’s increase in tension, crude oil prices had been relatively stable for much of the last year, trading between $50 and $65 a barrel with one exception. Oil also remains below the price it hit in 2018, when a barrel traded at $75.