Oil prices pushed over a three-year high on Friday as tensions between the United States and Iran continue to ratchet higher. Markets are increasingly expecting President Trump to pull out of the Iran nuclear deal negotiated by the Obama administration.
The original deal was signed onto by Iran, the United Nations Security Council member states (USA, France, Great Britain, Russia, and China), Germany, and the European Union, making a renegotiation a complicated affair. Worse yet, leaders in both Iran and the United States have been arguing against making any new compromises, a stance that could undermine the chance for a peaceful resolution.
Iran had been developing nuclear weapons, and renewed attempts to obtain weapons could prompt economic or military threats from the U.S., European Union, or neighboring countries like Saudi Arabia, Israel, or Turkey.
Iran is the world’s fifth-largest oil producer, and a third of all global oil tankers travel through the Strait of Hormuz, a narrow passageway controlled by Iran, making any economic or military standoff especially worrisome for the global oil supply.
As of midday Friday, oil prices traded near $70 per barrel for the first time since 2014.
The rally in oil prices is increasing fuel costs for Americans as well, with gasoline and diesel fuel futures approaching a three-year high over $2.10 per gallon, a wholesale price that excludes taxes, transportation, and other costs that consumers feel at the pump.
**Kansas Wheat Withers, Prices Explode
Kansas, the number one wheat growing state, is likely facing the smallest harvest in almost 30 years. According to the Wheat Quality Council’s annual crop tour, ongoing drought across the U.S. Southern Plains is likely to knock crop yields to 37 bushels per acre (bpa), sharply below last year’s 48 bpa yield.
Other nearby states are suffering from similar dry conditions, and upcoming forecasts show little rain for the next week.
Drought fears boosted the price of Kansas City wheat to a ten-month high on Thursday, with July KC futures trading for $5.68 per bushel. Prices have rallied nearly 25% this year, a solace to farmers facing sharply lower yields.