Oil prices extended sharp rise on Wednesday as escalating conflict in the Middle East continued to disrupt fuel shipments, triggering concerns over global energy supply and insurance coverage for key shipping routes.
Brent crude futures traded near $84 a barrel, the highest level since July 2024, building on an over 6% jump from the previous session amid widening geopolitical tensions. US West Texas Intermediate (WTI) crude also climbed toward $77 a barrel, marking a fourth consecutive session of gains.
The rally has been driven by a host of supply-side shocks linked to the conflict involving Iran and strikes by Israeli and US forces. Saudi Aramco halted operations at its Ras Tanura refinery on the Persian Gulf coast after a drone attack, and a major fire broke out at the UAE’s Fujairah oil trading hub after debris from an intercepted drone fell into facility infrastructure, though authorities later said normal operations had resumed.
Shipping through the Strait of Hormuz, a critical chokepoint through which roughly 20% of the world’s crude oil and LNG normally flows, has effectively ground to a halt for several days as vessels avoid the waters amid security threats and war-risk insurance providers consider withdrawing coverage.
Iraq, one of OPEC’s biggest producers, has cut around 1.5 million barrels per day of output, roughly half its normal production, after export facilities became inaccessible due to blocked shipping routes. If the situation worsens, Iraqi officials have warned that cuts could expand toward 3 million bpd or more.
Despite the price surge, markets have reacted to mixed signals. US President Donald Trump said Washington could offer navy escorts and insured passage for tankers to maintain energy and trade flows, a move seen as an attempt to reassure markets and cap runaway prices. Meanwhile, data from the American Petroleum Institute showed a larger-than-expected build in US crude inventories, which tempered some gains.
Analysts say the degree and duration of disruptions through the Strait of Hormuz will be a key determinant of whether prices continue rising or stabilise. Some forecasting models suggest that continued disruptions beyond a few weeks could push Brent above $100 per barrel, though diversification of supply and strategic reserves may limit extreme spikes.
Energy markets are also feeling broader inflationary pressure, with shipping costs for tankers hitting record highs and natural gas prices surging alongside crude. Traders are closely watching developments in regional hostilities and shipping corridors, which remain the central, immediate drivers of today’s volatility in energy prices.
