Oil prices have surged to their highest levels in roughly four months as escalating conflict in the Middle East raises fresh fears of major disruptions to global energy supplies.
Brent crude rose above $100 a barrel on Wednesday and remained above that level on Thursday, reaching about $101.61 a barrel in early trading. U.S. West Texas Intermediate crude was around $96.54. Brent has gained nearly 30 per cent since early August. (Reuters)
The latest rally has been driven by intensifying fighting between the United States and Iran and a sharp deterioration in security around key shipping routes.
Iran said it attacked 10 vessels near the Strait of Hormuz on Wednesday, following the U.S. sinking of five Iranian tankers. The confrontation has raised concerns that commercial shipping through the strategic waterway could face further disruption.
The Strait of Hormuz is one of the world’s most important energy chokepoints, historically carrying roughly one-fifth of global oil and gas supplies. Traffic has fallen sharply during the conflict, with only seven vessels passing through on Wednesday, about half the recent 10-day average, according to preliminary tracking data. (Reuters)
The situation is being compounded by renewed attacks by Iran-backed Houthi forces on Saudi Arabia. Recent strikes on southern Saudi cities and energy infrastructure have raised concerns about alternative export routes through the Red Sea.
The oil market is already operating with less room for disruption after months of reduced Middle Eastern exports and withdrawals from strategic reserves. The International Energy Agency expects global oil supply to fall by about 4.3 million barrels per day this year, while an estimated 10 million barrels per day of exports remain affected by the Iran conflict, according to shipping data cited by Reuters. (Reuters)
Higher oil prices could have consequences well beyond the energy sector. Prolonged prices above $100 could increase transport, manufacturing and electricity costs, adding to inflationary pressure and complicating decisions by central banks on interest rates.
For major oil-importing economies, the surge could also increase fuel costs for consumers and businesses. For oil-producing countries, however, higher prices could provide a boost to export revenues.
Analysts say the direction of the market will depend heavily on whether shipping through the Strait of Hormuz can return to normal and whether the conflict expands further.
For now, traders are pricing in a growing geopolitical risk premium, with the prospect of prolonged disruption keeping oil prices elevated.
With Brent already above $100 and tensions showing little sign of easing, the oil market is once again confronting the possibility that a regional conflict could develop into a major global energy shock.
