Brent crude prices surged past the $101-a-barrel mark on Thursday. Escalating military tensions between the US and Iran raised fresh concerns over disruptions to oil supplies from the Middle East, leading to the latest surge in the commodity.
For several months, crude prices remained under pressure as tanker movements through the Strait of Hormuz improved despite the collapse of a June ceasefire between the two countries.
However, the latest escalation has changed market sentiment, with traders focusing on the risks to one of the world’s most important oil transit routes.
Hormuz disruption fuels crude price surge
Oil flows through the Persian Gulf have slowed sharply following renewed hostilities. Earlier data suggested daily crude exports through the region had recovered to between 6 million and 9 million barrels in August. However, the latest fighting has reduced flows to below 2 million barrels a day, according to oilprices.com.
The situation worsened after the US said it had destroyed five Iranian oil tankers, while Iran responded by targeting a US military base in Jordan. The lack of signs of de-escalation has strengthened bullish sentiment in energy markets.
Despite the supply risks, oil prices have not yet reached the most extreme forecasts as some Middle Eastern producers continue to use alternative export routes.
Countries including the UAE, Iraq and Saudi Arabia have pipelines that bypass the Strait of Hormuz and provide alternative channels for crude shipments.
Falling inventories add to oil market concerns
Analysts warn that the longer the conflict continues, the greater the pressure on global oil markets. Countries are increasingly relying on crude inventories to offset supply disruptions, but stockpiles are limited.
The International Energy Agency has reported that millions of barrels of Middle Eastern production remain offline, while global oil inventories have declined significantly in recent months.
Although some analysts believe additional supply availability could limit price increases, market trends indicate crude prices have become increasingly resilient to declines. Several crude benchmarks, including Murban, Oman and the OPEC basket, are already trading above $100 a barrel.
With global oil demand expected to rise in the final quarter of the year and no clear signs of renewed US-Iran negotiations, analysts believe crude prices could remain elevated or move higher.
