Oil prices jumped higher on escalation tensions in the Middle East

Brent oil prices touched USD 70/bbl on Monday as the tensions between Iran, Iraq and the US continued to escalate. These tensions follow the killing of Iranian General Soleimani by the US in Baghdad. Iran’s leaders have threatened to respond. Meanwhile, Iraq’s parliament voted to expel US troops from the country. US President Trump threatened Iraq with sanctions if US troops are forced to leave the country. Markets fear that a further escalation of the conflict may hurt oil production and/or -exports in the region. Up until now oil production has not been affected, and the higher oil price can be therefore for now be explained by the pricing in of a risk premium for possible future production disruption.