Oil prices jumped significantly on Sunday, with Brent crude nearing $100 a barrel, following escalating tensions between the US and Iran. This surge is attributed to fresh US strikes on Iranian oil tankers and Iranian retaliation targeting US-linked ships, raising fears of supply disruptions from the critical Strait of Hormuz.
The US Central Command (CENTCOM) confirmed striking three Iranian crude carriers on September 5 after Iran's Islamic Revolutionary Guard Corps (IRGC) launched ballistic missiles at two US Navy warships. The targeted Iranian tankers, M/T Downy and M/T Stark 1, were permanently disabled, while M/T Kylo (also known as Noxen) was destroyed in the Gulf of Oman. Iran, in turn, stated it targeted three oil tankers using an unauthorized route through the Strait of Hormuz, as well as other US-linked ships, in response to American attacks.
The Strait of Hormuz, a choke point for roughly a fifth of global oil flows, is a major concern for oil-importing economies. Although about 70% of India's crude imports are sourced from outside the Strait, sustained high global prices would still increase India's energy bill and strain the rupee. Analysts suggest a sustained break above $100 would require concrete evidence of lost barrels rather than just risk-premium pricing.
Energy companies have seen clear benefits from the elevated prices, with stronger quarterly earnings and wider refining margins. Conversely, demand-side sectors like airlines and automakers face increased costs from higher jet-fuel bills and rising input expenses, leading to underperformance. Brent crude settled at $96.28 a barrel on Friday, placing it within striking distance of $100. US Energy Secretary Chris Wright noted that despite the conflict, oil flows through the strait and regional pipelines are likely at "two-thirds or more of pre-conflict flows."
