Oil prices surged approximately 7 percent on Tuesday, marking a third consecutive session of gains. The escalating U.S.-Israeli conflict with Iran is disrupting fuel shipments and raising alarms about Middle East oil and gas supply.
Brent crude futures climbed to their highest level since July 2024, reaching $85.12 a barrel. U.S. West Texas Intermediate crude also saw a significant rise, hitting its highest point since June.
Since Friday, both benchmarks have risen substantially due to widening conflict. Israel has attacked Lebanon, while Iran has responded with strikes targeting energy infrastructure in Gulf countries and tankers traversing the Strait of Hormuz, a critical artery for global oil and liquefied natural gas.
Concerns intensified after reports indicated the Strait of Hormuz is closed, with warnings of potential strikes on any vessel attempting passage. Insurers have cancelled coverage for ships, and global shipping rates have soared.
Analysts warn that targeting additional energy infrastructure in the region poses a greater risk, potentially leading to prolonged supply outages. Disruptions are already evident, with Iraq's Kirkuk crude oil loadings halted and Qatar stopping liquefied natural gas production. Saudi Arabia shut its largest refinery, and output in Iraqi Kurdistan has virtually ceased.
This geopolitical tension is also driving up natural gas prices across benchmark European and Asian markets.
Experts predict oil prices will remain elevated as the market assesses the conflict's impact. Some analysts have raised their long-term Brent oil price assumptions, with potential for extreme price spikes in a prolonged conflict scenario. Refined product futures are also climbing as Middle East processing facilities face risks.