U.S. crude oil breaks $78 per barrel as fears of war between Iran and Israel grow

U.S. crude oil futures broke above $78 per barrel Thursday on fears that Israel and Iran are heading to a direct conflict after the assassination of a Hamas leader in Tehran.

Iran Supreme Ayatollah Ali Khamenei has ordered a direct strike on Israel in response to the assassination of Hamas political leader Ismail Haniyeh, three Iranian officials told the New York Times.

West Texas Intermediate has surged nearly 5% since the killing of Haniyeh on Wednesday.

Khamenei ordered the direct strike at an emergency meeting of Iran’s national security council Wednesday morning after Haniyeh was killed, the officials told The Times.

Here are today’s energy prices:

• West Texas Intermediate September contract: $78.33 per barrel, up 42 cents, or 0.55%. Year to date, U.S. crude oil has gained 9.3%.
• Brent September contract: $81.39 per barrel, up 55 cents, or 0.68%. Year to date, the global benchmark has gained 5.7%.
• RBOB Gasoline September contract: $2.45 per gallon, little changed. Year to date, gasoline is up 16.8%.
• Natural Gas September contract: $2.07 per thousand cubic feet, up 3 cents, or 1.7%. Year to date, gas is down 17.7%.

Top Iranian officials are scheduled to meet Thursday with representatives of Yemen’s Houthis, Lebanon’s Hezbollah and militant groups in Iraq, five sources told Reuters.

“The assassination of the Hamas political leader Ismail Haniyeh overnight in Tehran moves this conflict appreciably up the escalatory ladder and edges the region closer to a wider war,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told clients in a note Wednesday.

Iran and Israel traded direct strikes in April, pushing oil prices to the highest point of the year, but they enemies ultimately pulled back from a full-scale war.

“At the time of writing, we are not certain whether the same containment dynamics will prevail, especially given that this current chapter involves Hamas, Hezbollah, as well as Iran,” Croft wrote.

“At a minimum, the ongoing Gaza ceasefire talks appear to be severely imperiled,” she said.

The rising tensions come as an OPEC+ committee is meeting Thursday to review members’ production quotas.