An overnight escalation in hostilities between the United States and Iran pushed global oil benchmark Brent futures above US$97 a barrel at one point on Wednesday, marking their highest intraday level since early June – though analysts said prices are unlikely to match the peak seen earlier this year.
The latest surge followed fresh US air strikes on Iranian targets on Tuesday, prompting retaliatory strikes by Tehran. Iran launched missiles and drones at sites across the region and targeted US-linked assets in Jordan, according to an Associated Press report on Wednesday.
CNN also reported on Tuesday that Iranian state broadcaster IRIB had cited multiple explosions in the Strait of Hormuz, one of the world’s most important energy-shipping chokepoints.
After the US Central Command announced the attacks on social media on Tuesday, Brent crude climbed more than 5 per cent to about US$95 a barrel, and continued to trade in volatile fashion around that level during Wednesday’s Asian session.
“Traders are bracing for further supply disruptions. In the near term, we see no practical path towards a resolution between the US and Iran, so hostilities are set to persist. That will keep global crude prices well-supported,” said Yan Lili, an analyst at Zhejiang-based Xinhu Futures.
Beyond the geopolitical risk premium, Zhao Xuyi, an analyst at Shanghai-based Guotai Junan Futures, said shipping represented “an even more critical factor underpinning oil prices”.
Reuters reported on Tuesday that two supertankers loaded with Saudi crude were struck by unknown projectiles in near-simultaneous incidents as they sailed out of the Strait of Hormuz late Monday. Both tankers were carrying 2 million barrels of Saudi crude.
“The strikes will lend additional support to high crude prices by eroding shipowners’ willingness to send vessels through this corridor. Should the Red Sea crisis drag on, Middle East crude exports could retreat to subdued levels,” Zhao said.
