Oil prices are poised for significant weekly gains as escalating tensions between the US and Iran raise concerns about energy flows from the Middle East. Brent crude futures traded close to $97 per barrel, marking their highest level since late July, after an increase of over 8% in the past three sessions. US West Texas Intermediate (WTI) crude also climbed, surpassing $92 per barrel.
The renewed hostilities include Iran claiming missile and drone attacks on US bases in Kuwait and the UAE, prompting Kuwait's air defenses to respond. This follows earlier US strikes, which Iran retaliated against by targeting American bases across the Middle East. US President Donald Trump indicated that renewed attacks on Iran would likely be short-lived but that the US was prepared for further action. Israeli Defense Minister Israel Katz also warned that an Iranian attack on Israel would lead to a severe response, including targeting all Iranian national, military, and civilian infrastructure.
The conflict's impact on global energy supplies is evident, with American diesel prices surging to $5.783 per gallon, the highest since mid-2022. Despite statements from US Energy Secretary Chris Wright that 17 million barrels of oil transited the Strait of Hormuz on Monday and 18 million barrels were escorted on Tuesday, some ship tracking services like Kpler reported a significant decline in traffic through the strategic waterway. US crude inventories also fell by nearly 4.5 million barrels last week, the first decline since late July, according to the Energy Information Administration (EIA), contributing to the price increase. Meanwhile, stockpiles at Cushing, Oklahoma, saw a marginal rise to 22.5 million barrels.
Analysts are expressing increasing concern that the conflict could spread across the Middle East, potentially closing the Strait of Hormuz for an extended period, which would severely disrupt global oil supplies. The lack of progress in peace talks between the US and Iran since the collapse of an interim accord in June further exacerbates these fears. Overall, crude prices have risen approximately 60% this year, with refined products like diesel experiencing even sharper rallies due to the ongoing Middle East conflict and the Russia-Ukraine war.
