Oil prices surged to their highest levels in three weeks on Thursday due to concerns regarding the ongoing tensions in the Iran war, which are expected to disrupt oil supply from the crucial Middle Eastern region.
In early trading, Brent crude futures for October delivery increased by $1.20, or 1.3 percent, reaching $92.82 per barrel, while US West Texas Intermediate crude futures for September gained 92 cents, reaching $86.75 per barrel.
The October WTI contract also saw a rise of $1.13, or 1.3 percent, reaching $85.52 per barrel. Both Brent and WTI benchmarks hit their peak levels since late July, marking a continuous increase for the fifth consecutive session after settling on Wednesday at their highest levels since July 24.
Analysts, including UBS’s Giovanni Staunovo, highlighted the persisting tensions in the Middle East as a factor contributing to potential supply disruptions, leading to a tightening of the oil market due to decreased oil exports from the region.
The recent decision by the UAE to halt financial and economic transactions with Iran has further emphasized the strained relations between the major Gulf Arab oil producer and Iran, impacting the oil market sentiment.
Despite sporadic attacks in the Middle East, Hiroyuki Kikukawa, the chief strategist of Nissan Securities Investment, noted that oil prices are being supported but lack substantial momentum without a significant escalation in the conflict. The uncertain peace talks and tensions involving the UAE, Oman, and Iran are expected to maintain a gradual upward trend in the market.
US President Donald Trump confirmed on Tuesday that no discussions were underway with Iran, while Iran insisted that the Strait of Hormuz remained closed, leading to concerns over potential economic repercussions. Shipping data revealed that traffic through the strait remained stagnant as efforts to resolve the conflict stalled.
The ongoing war, initiated by US and Israeli strikes on Iran in late February, has significantly disrupted global shipping through the waterway, reducing flows to levels well below those seen prior to the conflict. The war has also impacted refined fuel supply and reduced crude availability for refiners.
The Energy Information Administration reported a decrease in US stockpiles of distillate fuel, including diesel and heating oil, for the third consecutive week, while crude inventories unexpectedly rose by 4.4 million barrels.
