Crude oil extended its rally into a fourth consecutive session on Wednesday, with prices jumping more than $1 in early Asian trade as a fresh wave of attacks across the Middle East stoked fears that the region’s crude and shipping arteries could face prolonged disruption.
Brent crude, the international benchmark, climbed 1.4% to $99.33 a barrel by 02:12 GMT, inching closer to the psychologically charged $100 threshold that traders have watched warily for weeks. U.S. West Texas Intermediate (WTI) mirrored the move, rising 1.4% to $94.34 a barrel.
The latest gains cap off a remarkable run for Brent, which has surged roughly 25% since early August alone. That climb has been driven by a grim recalibration among traders: hopes that the six-month-old regional war might be nearing a negotiated end have evaporated, replaced instead by renewed and intensifying combat.
Tuesday’s developments marked a significant deterioration. Iranian-backed Houthi forces in Yemen launched missile and drone strikes on several Saudi cities, pulling Riyadh, a critical U.S. ally and one of the world’s largest oil exporters, further into confrontation.
The exchange didn’t stop there: U.S. forces struck multiple Iranian oil tankers, while Iran retaliated by targeting an American military base in Jordan.
The tit-for-tat strikes represent a sharp widening of a conflict that traders had, until recently, hoped might stay contained.
Market strategists say the latest violence effectively rules out any near-term diplomatic breakthrough. “Recent developments only reinforce the view that we are still some way from a restart in (peace) talks.
In the meantime, the market is likely to continue to price in a sizeable risk premium,” analysts at ING wrote in a note to clients.
That risk premium reflects growing anxiety not just about barrels lost to conflict, but about the broader infrastructure that gets oil from the wellhead to the tanker to the refinery. Regional energy facilities and shipping lanes already rattled by prior strikes now face the prospect of further, sustained disruption.
Riyadh has taken defensive measures, rerouting some crude exports away from the Strait of Hormuz, the narrow chokepoint through which a substantial share of the world’s seaborne oil passes. But analysts caution that this workaround has limits.
Any sustained or intensifying attacks on Saudi territory itself could severely complicate the kingdom’s ability to keep crude flowing reliably to global buyers, regardless of which export routes it uses.
Adding to the unease, analysts at OCBC flagged the destruction of Iranian oil infrastructure and vessels as a fresh flashpoint. “Iran’s attacks on Saudi energy facilities and the subsequent destruction of five Iranian tankers raised concerns about another prolonged disruption to oil supplies,” the bank said in a note.
The loss of tanker capacity layered atop strikes on fixed energy infrastructure suggests the market is now grappling with threats to oil supply from multiple angles simultaneously: production, storage, and transport.
With Brent within striking distance of triple digits, the coming sessions will likely hinge on two questions: whether the Houthi-Saudi exchange escalates further and whether U.S.-Iran hostilities spread beyond the current tit-for-tat strikes.
Until there’s clarity on either front, analysts expect the geopolitical risk premium embedded in oil prices to persist and potentially grow.
WHAT YOU SHOULD KNOW
Oil is closing in on $100 a barrel because the Middle East conflict is escalating, not de-escalating. Houthi strikes on Saudi cities, U.S. strikes on Iranian tankers, and Iranian retaliation against a U.S. base have erased hopes of a near-term ceasefire.
With multiple oil-producing nations and shipping routes now directly in the crossfire, analysts expect prices to stay elevated with a heavy “risk premium” until the fighting shows real signs of cooling.
