Crude Oil Prices Jump Over 3% To Near $84 As Middle East Conflict Raises Supply Concerns

Global crude oil prices surged on Thursday after escalating military tensions involving Iran heightened fears of supply disruptions in one of the world’s most critical oil transit regions.

Brent crude futures rose by $2.65, or 3.26%, to $83.99 per barrel, marking the fifth straight session of gains. Meanwhile, U.S. West Texas Intermediate (WTI) crude increased by $2.76, or 3.70%, to $77.42 per barrel, according to data reported by Reuters.

The rally comes as the conflict involving Iran entered its sixth day, increasing uncertainty in global energy markets and raising concerns about potential disruptions to crude supply.

Escalating Conflict Raises Supply Concerns

Tensions intensified early Thursday after Iran launched additional missile attacks toward Israel, forcing millions of civilians to take shelter in bunkers, Reuters reported. The development occurred hours after diplomatic efforts in Washington aimed at halting ongoing U.S. air operations failed.

In another escalation, a U.S. submarine reportedly sank an Iranian warship near Sri Lanka on Wednesday, resulting in at least 80 deaths, according to Reuters. At the same time, NATO air defence systems intercepted and destroyed an Iranian ballistic missile heading toward Turkey.

Shipping activity around the Strait of Hormuz has also been affected. Iranian forces reportedly targeted oil tankers operating in the region, and explosions were reported near a tanker off the coast of Kuwait, according to the United Kingdom Maritime Trade Operations.

The Strait of Hormuz is a vital global oil shipping route through which a large portion of the world’s crude oil exports pass every day; thus, any disturbance in the region is of significant importance to the energy markets.

Supply Adjustments Across Global Markets

The supply of oil has also been impacted as the conflict in the Middle East persists. Iraq, the second-largest crude oil producer in the Organization of the Petroleum Exporting Countries, has cut back on the production of oil by nearly 1.5 million barrels per day as it lacks storage capacity as well as an export route, according to a report by Reuters.

Other countries are also adjusting fuel trade flows. Bloomberg reported that China has instructed its largest refiners to suspend exports of diesel and gasoline to prioritise domestic demand during the ongoing crisis.

In addition, a major Indian refinery has informed customers that it will halt fuel product exports, while Japanese refiners have asked their government to release oil from strategic petroleum reserves, according to Bloomberg.

These changes indicate that the ongoing conflict is beginning to have an impact on the supply chain for crude oil and the refined fuels in various key energy consumption centers.

As a result of the conflict, shipping and production levels are likely to vary, and thus the oil market is expected to remain sensitive to events in the Middle East.