Key points
- Brent crude rises above $95 a barrel
- WTI crude climbs above $90
- Hormuz disruption fears keep supply risks elevated
ISLAMABAD: Oil prices rose another 1 per cent on Wednesday, extending a gaining spree triggered by renewed US-Iran fighting and growing fears that the conflict could further disrupt crude shipments through the Strait of Hormuz.
Brent crude futures, the international benchmark for oil prices, rose $1.03, or 1.1 per cent, to $95.68 a barrel in early trading.
US West Texas Intermediate (WTI), the benchmark for US crude, gained 61 cents, or 0.7 per cent, to $90.83 a barrel.
Both contracts had surged more than $4 on Tuesday, marking Brent’s largest daily gain since July 24 and WTI’s biggest increase since July 23.
Oil prices registered the latest gains after the United States and Iran exchanged fresh strikes overnight. The most serious escalation between the two countries in weeks had weakened hopes that a diplomatic effort could quickly restore calm.
The United States said it launched a series of airstrikes against Iranian targets.
Iran responded with missile and drone attacks on US-linked military facilities in the region, including bases in Jordan and Bahrain.
Jordan said its air defences intercepted most of the missiles entering its airspace, while Kuwait also reported responding to hostile drone activity.
READ ALSO: Oil Prices Jump More Than 2% as Hormuz Tensions Escalate
The renewed military confrontation in the Middle East has put the Strait of Hormuz at the centre of the oil market.
The narrow waterway between Iran and Oman is one of the world’s most important energy routes.
Before the conflict disrupted shipping, about one-fifth of the world’s oil consumption passed through the strait.
Iran’s Islamic Revolutionary Guard Corps (IRGC) has warned that the latest US attacks would further restrict traffic through the waterway, which has already seen a significant reduction in commercial shipping.
The market is particularly sensitive to any interruption because the strait provides a major export route for crude and petroleum products from Gulf producers.
The latest escalation followed a weekend flare-up in fighting, the first major resumption of hostilities since July.
Oil tankers attacked
Two tankers departing the Strait of Hormuz were also attacked earlier on Monday, adding to concerns about the safety of commercial shipping and prompting traders to seek alternative sources of crude.
US Energy Secretary Chris Wright claimed 17 million barrels of crude passed through the Strait of Hormuz on Monday, the highest volume since oil shipments were reduced after the conflict began.
The figure indicates that some shipping has continued despite the military confrontation, but traders remain concerned that further escalation could reduce those flows again.
The sharp rise in prices also reflects the market’s changing assessment of the conflict.
Earlier expectations that the fighting might ease had helped push oil prices lower, but those expectations have been rapidly reversed as attacks resumed.
The latest rally has taken Brent to its highest level in five weeks. The benchmark had been trading below $90 a barrel as recently as last week.
But it crossed that level on Monday and accelerated higher after renewed US-Iran fighting.
Brent then jumped more than 4 per cent on Tuesday before extending its gains on Wednesday.
Crude stocks in the United States fell by 2.6 million barrels in the week ended August 28, according to market sources citing data from the American Petroleum Institute.
US distillate inventories, which include diesel and heating oil, declined by another 265,000 barrels.
The inventory decline comes at a time when geopolitical risks are already tightening the market’s focus on available supplies.
The impact is extending beyond oil markets. Higher crude prices raise the cost of petrol, diesel, aviation fuel and other petroleum products, potentially increasing inflationary pressure in economies that rely heavily on imported energy.
For major oil-importing economies, the renewed price increase presents an additional economic challenge. Higher fuel costs can widen import bills, increase transportation expenses and put pressure on governments to either raise domestic fuel prices or absorb part of the increase through subsidies.
