Washington strengthens the “military position of its allies” in the Gulf, and oil prices continue to rise
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The US State Department approved potential military sales deals to Saudi Arabia and Iraq, including ammunition, engines and helicopters, in the latest US arms deals with the two countries.
These developments come at a time when oil prices rose significantly during the week, with renewed confrontations between the United States and Iran and the continued disruption of shipping traffic through the Strait of Hormuz.
The US State Department said on Friday that it had approved a potential deal to sell “Joint Extended-Range Direct Attack Munitions (JDAM-ER)” to Saudi Arabia, with an estimated value of five billion dollars, with Boeing being the main contractor in the deal.
The ministry also approved another potential deal to sell AGT 1500 engines to Saudi Arabia, with an estimated value of $750 million, for which Honeywell will be the main contractor.
Thus, the estimated value of the two potential deals with Saudi Arabia reaches $5.75 billion.
“Joint Direct Attack Munitions” are used to convert unguided bombs into precision-guided munitions, while the wide-range version allows them to hit targets from greater distances.
In a separate context, the US State Department said that it had approved the potential sale of Bell 412 EBX helicopters and related equipment to Iraq, worth $150 million, with Bell Textron being the main contractor in the deal.
This approval comes days after Washington announced its approval of a broader potential military deal for Iraq, worth an estimated $800 million, which includes Bell 412 EBX and Bell 407M helicopters, along with weapons, sensors, equipment, and technical and logistical support.
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Washington said that the broader deal aims to enhance Iraq's capabilities in the field of air transportation, reconnaissance, and targeting ground targets, and help it confront current and future threats.
The approval of the US State Department does not mean that the deals have been finalized, as they represent a step within the process of US foreign military sales, and the final value and equipment included may change before the contracts are signed.
The US State Department said on Friday that it had agreed to potentially provide maintenance services for F-16 aircraft and other related equipment to the Sultanate of Oman at an estimated cost of $188 million.
High oil prices and continued disruption of tanker traffic
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Oil prices rose, Friday, to end the week with significant gains, after renewed military confrontations between the United States and Iran in the seventh month of the conflict, at a time when the movement of oil tankers across the Middle East is still facing turmoil.
Brent crude futures closed at $92.68 per barrel, an increase of 76 cents, or 0.8 percent, while West Texas Intermediate crude futures ended trading at $91.48 per barrel, an increase of 18 cents, or 0.2 percent.
Over the course of the week, Brent crude rose by 7.6 percent, while US crude recorded gains of nearly 10 percent, as oil supply routes in the Middle East continue to be affected by the war.
The rise in oil prices, along with a greater increase in fuel prices, contributed to pushing inflation rates and government borrowing costs up around the world, reinforcing fears of a slowdown in global economic growth unless pressures on energy markets ease.
Although the US government said that oil flows from the Middle East have returned in recent weeks to levels close to normal, analysts and tanker tracking data indicate that shipping traffic is still facing major disruptions.
Preliminary shipping data showed that four ships transporting goods crossed the Strait of Hormuz on Thursday, a number far below the average of the previous ten days of about 15 ships.
Norbert Röcker, head of economics and next generation research at Julius Baer*, said that the stalemate in the conflict and renewed hostilities are repeatedly revitalizing the “risk premium” embedded in oil prices.
He added that there are no indications yet that the escalation this week has significantly affected Middle East exports or led to scarcity in the oil market, considering that the current rise in prices appears to be driven mostly by fears and market sentiment.
