Oil Prices Surge to US$92 as Middle East Conflict Escalates

Global oil prices continued their rally in early trading on Wednesday, driven by an escalation of conflict in the Middle East that has reignited market concerns over global energy supplies. Brent crude was at US$92.13 per barrel, up 1.23% from the previous close, while West Texas Intermediate (WTI) strengthened to US$85.28 per barrel, a gain of 0.44%. The increase pushed Brent to its highest level in more than five weeks. Compared to Friday’s close, Brent has surged approximately 4.6%, while WTI has risen around 3.4%. The price strengthening came after the United States military continued strikes against Iranian military targets for the eleventh consecutive night. Simultaneously, Kuwait reported its air defence systems intercepted an Iranian drone, broadening market fears that the conflict could potentially disrupt oil supply flows from the Middle East. Supply risks gained further attention after Iran-backed Houthi groups threatened Saudi oil tankers in the Bab el-Mandeb strait and announced a naval blockade against Saudi Arabia. This route now plays a larger role for Saudi oil exports as traffic through the Strait of Hormuz has sharply decreased since the ceasefire between the United States and Iran collapsed earlier this month. Beyond geopolitical developments, market participants are also monitoring data from the American Petroleum Institute (API) showing crude oil and distillate product inventories rose last week, while petrol stockpiles fell. The market now awaits official data from the Energy Information Administration (EIA) to be released on Wednesday local time for a clearer picture of supply and demand conditions in the United States. The escalation of conflict in the Middle East, threats to major oil shipping lanes, and the anticipation of US oil stock data are expected to keep price volatility high in the short term. As long as the risk of supply disruption from the Persian Gulf region remains significant, the oil market is likely to maintain a risk premium on prices.