Oil surges as Brent crude nears critical $100 mark amid escalation in West Asia

Brent crude oil approached the $100 per barrel mark following the US military's attack on Iranian tankers near the crucial crude-export hub of Kharg Island, raising concerns about potential further disruptions in the Strait of Hormuz.

Iran-US Flare-Up Pushes Oil

The global benchmark is now less than $1 away from reaching triple digits after renewed hostilities throughout West Asia, while West Texas Intermediate hovered around $95.

According to Central Command, the US military destroyed five Iranian tankers transporting crude oil in retaliation for attempts to strike a US Navy warship with ballistic missiles.

In retaliation, Tehran launched ballistic missiles at Jordan and issued warnings to vessels in the Persian Gulf. Iran's state television, citing the IRGC, reported that all tanker crews near Kuwaiti and Bahraini ports should "immediately abandon their vessels, whether at anchor or docked, as they will be targeted."

Saudi Under Attack

The US strikes came after new assaults by Iran-backed Houthi militants on energy facilities in southern Saudi Arabia, which forced several sites to cease operations. Tensions have escalated across the Middle East over the past week, disrupting a period of relative calm and driving oil prices upward.

Darrell Fletcher, managing director for commodities at Bannockburn Capital Markets, stated, "The path of least resistance is a strong and steady grind higher as the war enters its seventh month. The fundamental outlook for products remains bullish, with global inventories and reserves declining. In the usual pattern, the US and Iran continue their counterattacks and warnings."

Oil On Surge

Brent crude has risen over 60% this year and is nearing the $100-a-barrel threshold for the first time since late July, said a Bloomberg report. Refined products, such as diesel, have experienced even sharper increases as the conflict in the Middle East has expanded to the Red Sea near Saudi Arabia, alongside the ongoing Russia-Ukraine war.

Before the conflict in Iran, approximately 20% of the world's oil and liquefied natural gas was transported through the Strait of Hormuz to international consumers. Although some crude oil continues to be shipped via this narrow passage, it is often done so by tankers that have their transponders disabled, exposing them to a constant risk of attack.

According to another Bloomberg report, the Iranian tankers that were destroyed were affiliated with Iran's Islamic Revolutionary Guard Corps. These attacks represent an escalation in the United States' efforts against Tehran, which already encompasses a naval blockade that has considerably diminished the nation's oil exports.

In a separate development, a resurgence in Chinese purchases has contributed to a tightening of the global oil market and an increase in prices for certain crude grades. This uptick signifies a shift from previous months, during which refiners relied on substantial inventories to curtail imports and protect themselves from rising prices.

Also Read: Odisha braces for intense showers; Delhi, Mumbai see subdued weather