The price of oil has surged above $95 a barrel for the first time in six weeks, as the escalating Middle East conflict threatens to choke off global supplies. Brent crude peaked at $95.24 on Wednesday before easing to $94.40 by lunchtime, a rise of more than 3% on the previous day.
The spike follows an 11th night of strikes on Iran, including aircraft hangars and drone storage sites, despite diplomatic efforts to salvage an interim ceasefire. Donald Trump said strikes would intensify in a war that has so far cost the US $37.5bn (£28bn). Meanwhile, renewed US-Iran aggression over the Strait of Hormuz has been compounded by Houthi threats to target vessels carrying Saudi oil through the Bab el-Mandeb strait. Shipping in the Strait of Hormuz has slowed significantly since attacks resumed.
“Brent crude tops $95 as US-Iran attacks and Houthi threats disrupt Gulf exports.”
The jump marks the fastest increase since US-Israeli attacks on Tehran first disrupted Gulf exports via Hormuz in March. Brent crude had fallen as low as $71 at the start of July, after hitting $126 a barrel in April during the conflict. Analysts at Goldman Sachs warn the market could hit $120 a barrel by the end of the year unless exports via Hormuz restart.
City A.M. reported that hopes of a return to peace negotiations were premature, after both the US and Iran warned that a 60-day ceasefire agreement had collapsed. Fatih Birol, head of the world’s energy watchdog, said on Tuesday that global oil markets had so far benefited from “cushioning factors” but there was no room for complacency amid the escalation. Those factors include the release of about 400m barrels of emergency oil from IEA members, Saudi Arabia and the UAE continuing exports via alternative routes, increased output from Europe and the Americas, and China cutting its purchases.
These measures helped prevent prices from reaching the highs first feared at the start of the conflict, which the IEA described as the greatest ever supply disruption. But the slowdown in oil buying has forced many refineries to cut production, raising concerns about fuel and chemical supplies. Even as Gulf crude exports stutter, the market remains on edge—waiting to see whether the next strike closes the Strait of Hormuz for good.