Brent crude tops $92 as US-Iran strikes fuel supply fears

Oil prices rose in Asian trading on Wednesday, with Brent crude hitting its highest level in more than five weeks, as the escalating military confrontation between the United States and Iran continued to rattle energy markets and threaten critical shipping routes in the Middle East.

Brent crude was trading up around 1.2 percent near $92 a barrel in early Wednesday trading, its highest intraday price since mid-June, according to AFP. West Texas Intermediate climbed above $85 a barrel. The gains built on Tuesday's settlement, when Brent rose 2 percent to close at $91.01 and WTI gained 2 percent to settle at $84.91.HDFC sky+2

Escalating Hostilities

The rally followed fresh U.S. strikes on targets in southern and western Iran and Iran's retaliatory attacks on U.S. military installations across the Gulf. Tehran has targeted U.S. radar and air defense installations in Bahrain, Kuwait, and Jordan in recent weeks, according to Al Jazeera, striking facilities including the Fifth Fleet headquarters in Bahrain and Ali Al Salem Air Base in Kuwait.Al Jazeera English+2

The conflict, which reignited on July 7 after a June ceasefire collapsed, has centered on control of the Strait of Hormuz, through which an estimated 20 percent of the world's oil passes. The U.S. reimposed a naval blockade on vessels traveling to and from Iranian ports, while Iran has claimed sovereignty over the waterway and struck commercial tankers.CNN+2

Supply Risks Mount

The International Energy Agency warned in its July report that the escalation "could upend the forecast" for global oil markets, noting that benchmark prices had plunged to $68 per barrel during the brief June ceasefire before surging again once hostilities resumed. Both Brent and WTI are now up roughly 22 percent since the start of July.International Energy Agency+1

Adding to supply concerns, Yemen's Houthi rebels — backed by Iran — have threatened to impose a naval blockade on Saudi Arabia, further reducing oil tanker traffic through the Red Sea. Goldman Sachs ↘ 1.38% has warned that if disruptions in the Strait of Hormuz persist through the year, Brent crude could surpass $120 per barrel by the fourth quarter.Facebookapp+2

Diplomatic Efforts

International mediators have presented a 10-day ceasefire proposal to the U.S. and Iran, though prospects for a lasting agreement remain uncertain. President Donald Trump, who declared the previous interim ceasefire "over" in early July, has framed U.S. operations as necessary to protect commercial shipping, proposing a 20 percent fee on all cargo passing through the strait. Iran's Revolutionary Guard Corps has vowed to continue retaliatory strikes as long as U.S. operations persist in what it considers Iranian sovereign waters.Reuters+1