LONDON: Global oil prices extended gains on Wednesday as renewed military confrontation between the United States and Iran heightened concerns over energy supplies, with tensions centred on the strategic Strait of Hormuz.
Brent crude futures rose 99 cents (1.2%) to $85.72 per barrel by 0400 GMT, while US West Texas Intermediate (WTI) crude gained 64 cents (0.8%) to $79.98 per barrel.
Oil prices had already climbed 2% on Tuesday, reaching their highest level in a month, amid fears that continued hostilities could disrupt supplies from the Gulf region.
Why Are Oil Prices Climbing Amid the Middle East Conflict?
The latest rally followed US President Donald Trump’s decision to reimpose a naval blockade on Iranian ports and launch a fresh wave of strikes against Iranian-linked targets. The US military said the attacks were aimed at degrading Iran’s capabilities to target commercial shipping in the Strait of Hormuz.
Iran, meanwhile, said the Strait of Hormuz remains closed following the renewed hostilities, intensifying concerns over one of the world’s most critical energy transit routes. Before the conflict, nearly one-fifth of global oil and liquefied natural gas (LNG) shipments passed through the waterway.
President Trump also warned that energy infrastructure could become a target if the conflict continues, signalling the possibility of further escalation.
How Could the Escalating US-Iran Conflict Impact Global Energy Markets?
Iran’s military said it had launched drone attacks on US positions at Jordan’s Azraq Air Base, while the Islamic Revolutionary Guard Corps (IRGC) claimed strikes on weapons and storage facilities in Bahrain and Kuwait. The Pentagon did not immediately comment, and Reuters could not independently verify the claims.
Analysts cautioned that while physical oil supplies remain adequate, any prolonged disruption in the Strait of Hormuz or additional sanctions on Iranian exports could significantly tighten global markets.
“The physical oil market remains adequately supplied, but any further escalation involving the Strait of Hormuz or additional sanctions on Iranian exports could quickly tighten market sentiment and add further risk premiums,” said Priyanka Sachdeva, Senior Market Analyst at Phillip Nova.
Tim Waterer, Chief Market Analyst at KCM Trade, said Brent crude could approach $100 per barrel if the conflict intensifies and damages Gulf energy infrastructure. However, he noted prices could stabilize between $75 and $80 per barrel if diplomatic efforts succeed in reopening the Strait of Hormuz and reducing regional tensions.
The renewed fighting has also cast doubt on the durability of the memorandum of understanding reached last month, which had been viewed as a potential pathway to a lasting ceasefire after months of conflict.