Oil prices surged following intensified military strikes between the US and Iran over the weekend, escalating tensions across the Middle East. Brent crude, the international benchmark, climbed approximately 3% to $88 per barrel, marking its largest weekly gain since April. West Texas Intermediate (WTI), the US benchmark, also rose to nearly $84 a barrel. This sharp increase reflects heightened market fears of prolonged supply disruptions and attacks on regional energy infrastructure, particularly given the conflict's expansion beyond military targets to include power, water, and oil facilities in Kuwait and Bahrain.
The renewed violence has significantly heightened concerns over the Strait of Hormuz, a critical chokepoint for global oil transit. Iran's Islamic Revolutionary Guard Corps Navy warned that exports of oil, natural gas, and petrochemicals would not pass without Iranian coordination, and effectively closed the strait to shipping traffic after the conflict began with US and Israeli strikes on February 28. U.S. Central Command stated that recent strikes aimed to degrade Iran's ability to restrict tanker traffic through this waterway, which previously accounted for roughly 20% of global oil supplies. Ship tracking data indicates a dwindling number of vessels transiting the Strait, with only ten ships recorded in the last 24 hours and 444 waiting.
Analysts are warning that the previous buffers against dramatic oil price surges, such as excess inventories, have largely been depleted. Energy Aspect's Amrita Sen noted that the roughly 400 million barrels of excess inventories at the start of the war are now "close to nothing." US oil inventories have continued to fall, with a 1.7 million barrel decline in the previous week, according to the Energy Information Administration. Giovanni Staunovo, a commodity analyst at UBS, stated that the oil market is "tightening, which is likely to keep oil prices supported," and expressed concern over repeated strikes on vessels and energy infrastructure.
