Brent crude oil prices are climbing towards $100 a barrel, reaching $99.41 per barrel, an increase of 1.5%, while US-traded oil is up 1.6% at $94.55. This surge follows a series of escalating events in the Middle East, including US forces striking five Iranian oil tankers. Four of these tankers, linked to Iran's Revolutionary Guards Corps (IRGC), were targeted in the Gulf of Oman, and another near Kharg Island, a significant oil export terminal for Iran. These strikes were in response to Iran twice targeting an American warship, though the US successfully evaded these attacks with no harm to troops.
Iran retaliated by launching missiles at a US base in Jordan, with Jordan's air defense systems reportedly shooting down 18 of 20 missiles. The US stated that the targeted Iranian tankers were part of a "multi-billion-dollar shadow network that funds the IRGC and its regional proxies." Iran has issued warnings of further retaliatory strikes on US-linked ships in Kuwaiti and Bahraini ports, advising oil tanker crews to abandon their vessels. Kharg Island, where one tanker was hit, handles approximately 90% of Iran's crude oil exports.
Adding to the tensions, Iran-backed Houthi militants have also attacked Saudi energy facilities, including the 400,000 barrel-a-day Jazan refinery. These attacks have led to temporary halts in operations at several Saudi energy facilities and injured 73 civilians. The renewed hostilities have significantly constrained traffic in the Strait of Hormuz and the Bab el Mandeb strait, key global shipping lanes. Goldman Sachs analysts predict that if Persian Gulf oil flows remain low, Brent could exceed $120 a barrel, highlighting the significant upside risk to oil prices due to the prolonged conflict and shipping disruptions. HSBC analysts concur, suggesting Brent could rise to around $120 if diplomacy fails and Hormuz flows remain near current low levels.
