Brent crude has exceeded $101 per barrel for the first time since July, as the escalation of attacks in the Middle East intensifies concerns over potential energy supply disruptions in the oil-rich region. The global benchmark rose more than 3% during New York trading hours, while West Texas Intermediate (WTI) hovered around $96 a barrel.
US military forces reported that Iran attempted to strike a US Navy vessel with ballistic missiles overnight, prompting the US to destroy five Iranian oil tankers in retaliation. Iranian media outlets claimed Tehran had targeted two American warships and eight tankers in the Persian Gulf, though no immediate confirmation of these attacks has been obtained.
The conflict has disrupted oil shipments through the Strait of Hormuz, a critical maritime chokepoint, although millions of barrels of crude continue to flow daily via tankers that have switched off tracking signals to conceal their movements, which has partially tempered the price surge. It remains unclear how the latest round of escalation will affect these "dark fleet" shipments.
This escalation comes as Iran-backed Houthi rebels in Yemen continue to target Saudi Arabian energy infrastructure, with a "potential danger" alert sounding in Saudi Arabia's southern region on Wednesday, just a day after the area was hit by attacks. European natural gas prices have climbed to their highest levels since 2023 as the Iran conflict pushes up energy costs ahead of the winter heating season.
Brent crude has broken through $100 a barrel for the first time since July, with mutual attacks between the US and Iran driving the global oil benchmark higher. "The supply gap in the oil market has eased somewhat as higher levels of 'dark fleet' shipments have stabilised, but overall the market remains tight," said Ryan McKay, senior commodity strategist at TD Securities. "With fresh attacks occurring, supply could tighten further."
Brent crude has risen approximately 65% so far this year. However, aside from a brief surge in July, Brent futures had traded below $100 a barrel for over three months prior, as Persian Gulf producers managed to boost exports. Technical factors have also amplified the price rally.
Data from Kpler's Bridgeton Research Group shows that trend-following commodity trading advisors have increased their long positions, with bullish positioning in both Brent and WTI now at 91%, compared with 45% for Brent and 36% for WTI on August 31. These algorithmic traders tend to exacerbate price volatility.
Meanwhile, refined products such as diesel have seen much sharper gains, as the Middle East conflict combined with the Russia-Ukraine war has tightened supplies. This could usher in a new wave of inflationary pressures, adding to the burden on central bank policymakers globally.
"With the war entering its seventh month, the path of least resistance remains steadily higher," said Darrell Fletcher, managing director of commodities at Bannockburn Capital Markets. "The fundamentals for refined products remain bullish as global inventories and reserves are declining. Following the established pattern, the US and Iran continue to retaliate against each other and issue warnings."
Prices: WTI crude rose 3.6% to $96.38 a barrel as of 11:07 a.m. New York time. Brent crude rose 3% to $101.23 per barrel.
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