Crude oil prices surged for a fourth consecutive session on Wednesday, with Brent approaching the psychologically important $100-a-barrel threshold as a fresh escalation in the US-Iran conflict heightened fears of prolonged disruptions to oil supplies from the Gulf.
Brent crude futures rose 1.6% to $99.49 a barrel in early trading, their highest level since late June, while US West Texas Intermediate gained 1.6% to $94.63. Brent has now climbed sharply from levels seen in July, with the latest rally driven by growing concerns over the security of the Strait of Hormuz and the risk of the conflict spreading across the Gulf.
The move towards $100 comes after a dramatic escalation in the six-month-old conflict. The US military said it destroyed five Iranian oil tankers on Tuesday after Iran twice attempted to strike a US Navy warship with ballistic missiles. Tehran retaliated on Wednesday by launching missiles at a US-linked military base in Jordan and attacking vessels in and around the Strait of Hormuz.
The latest confrontation has significantly increased the risk premium embedded in crude prices, with traders increasingly concerned that attacks on shipping could translate into an actual reduction in oil exports from the Gulf.
Iran has also directly threatened commercial shipping linked to two key Gulf hubs, warning crews aboard oil tankers near ports in Bahrain and Kuwait to leave their vessels, whether they were anchored or docked. Tehran said the vessels could be targeted because Bahrain and Kuwait host US forces and support Washington's military campaign.
The threat has added another layer of risk for a market already grappling with falling tanker traffic through the Strait of Hormuz.
Only six commodity vessels crossed the waterway on Tuesday, according to preliminary data from ship-tracking company Kpler, compared with a 10-day average of about 12. Five vessels entered the strait and only one exited. Traffic through the Bab el-Mandeb Strait was also below its recent average.
The Strait of Hormuz is particularly important for global energy markets because of the enormous volumes of crude, petroleum products and liquefied natural gas normally shipped through the waterway. Any prolonged disruption would tighten global supplies and could send prices significantly above the $100 level.
The latest escalation is not confined to the immediate waters around Iran. Iran-backed Houthi forces in Yemen have also stepped up attacks on Saudi cities and energy infrastructure, adding to concerns that the conflict could increasingly threaten multiple oil-producing and transit centres across the region.
For oil-importing economies, the renewed price surge is particularly worrying because higher crude prices feed directly into transportation and manufacturing costs and can complicate efforts by central banks to contain inflation.
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