Middle East conflict escalation drives continued rise in oil prices

Investing.com - On Wednesday during Asian trading hours, oil prices continued to rise after two consecutive days of sharp gains, as conflicts between the U.S., Israel, and Iran intensified, raising concerns over supply disruptions.

As of 10:25 PM Eastern Time (3:25 AM Beijing Time), May-dated Brent crude futures increased by 1% to $82.21 per barrel, while West Texas Intermediate (WTI) crude futures rose by 0.7% to $75.07 per barrel.

Both major benchmarks closed nearly 5% higher on Tuesday. Brent crude surged above $85 per barrel, reaching its highest level since July 2024.

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Middle East conflict escalates, traders weigh supply risks

The current crisis began last weekend when U.S. and Israeli forces launched coordinated strikes against Iranian military targets, resulting in the death of Supreme Leader Ayatollah Ali Khamenei.

The situation worsened as Israel and U.S. forces carried out further strikes on Iranian-related facilities on Tuesday. Iran has increased military deployments in the Gulf region and issued warnings to global shipping operators.

Tehran has also targeted oil tankers passing through the Strait of Hormuz, a narrow waterway that carries about one-fifth of global oil transportation. Iranian authorities have vowed to attack any ships passing through the strait.

The Strait of Hormuz is a critical route for oil exports from major producers like Saudi Arabia, Iraq, and the UAE, and threats to this passage add significant geopolitical risk premiums to oil prices.

ING analysts stated in a report: “Disruptions to oil flows through the Strait of Hormuz have begun to impact upstream oil production.”

They noted reports that Iraq has started shutting down production at its largest Rumaila oil field and the West Qurna-2 oil field, totaling a capacity of 1.2 million barrels per day.

Trump to facilitate passage of oil tankers through the Strait of Hormuz

However, during the previous trading day, U.S. President Donald Trump stated that if necessary, the U.S. Navy would escort commercial ships and pledged government support to ensure safe passage. Following this, oil prices retreated some of their earlier gains.

ING analysts wrote: “This guarantee has emerged as insurance companies have canceled war risk coverage for ships passing through the Strait of Hormuz.”

They added: “It’s good news, but obviously not an overnight fix.”

While military escalation has supported oil prices, signs of international efforts to secure the waterway may limit further upside in the short term.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.