Oil Prices Soar As Crisis In Iraq Unfolds

Brent crude oil rose dramatically as violence in Iraq continued and supply interruptions looked more likely.

The commodity traded at $114.19 at 8:15 GMT, near a nine month high.

The Suni-led Islamic State in Iraq and the Levant or ISIS, a splinter group from al-Qaeda, expanded their stronghold in Northern Iraq this week, over taking several cities between Mosul and Baghdad and prompting the nation’s government to declare a state of emergency and ask the US for help.

CNBC reported that the White House has threatened military action against the Islamic militants if their push towards Baghdad is not aborted.

Thus far, there have been no oil supply disruptions, but as fighting presses closer to the nation’s capital, trucks of Shi’ite volunteers are lining up to defend the city in what will likely be a bloody fight with many casualties.

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Uncertainty in OPEC’s second largest supplier has pushed crude to new highs; and many analysts expect to see prices climb even higher as investors rework their opinions.

Recent losses from other producers like Libya were being covered by Iraqi oil, so if the fighting does cause a supply interruption, it could have a large impact on the market.

The geopolitical tension in Iraq overshadowed weaker than expected US data which had the potential to weigh on oil prices. US retail sales came in below expectations in May and the number of Americans seeking unemployment benefits rose last week.

The figures suggest that the US’s recovery may not be on as solid ground as was expected. However, data from China was promising with May industrial output up 8.8 percent and retail sales up 12.5 percent.