Brent oil prices crossed $100 for the first time in roughly two months on Wednesday as a resurgence in the US-Iran conflict and worries over disruptions throughout the global oil complex pushed prices past the triple-digit mark.
Futures on Brent crude (BZ=F), the international benchmark, rose by roughly 3% on Wednesday to cross over $100 per barrel, while those on US benchmark WTI crude (CL=F) gained a bit more than 2% to push past $95.
The conflict in the Middle East, now in its seventh month, has continued to snarl the flow of energy products out of the Persian Gulf as Washington and Tehran remain at war, with shipping through the Strait of Hormuz still constrained by the threat of violence.
Sending prices higher on Wednesday was news that the US military overnight sank five Iranian crude oil tankers in what US Central Command said was a response to attempts by Iran to strike US Navy carriers in the region. The move by the US marks the second time in as many days American forces have targeted Iran’s shipping sector.
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Over the past two weeks, the US and Iran have firmly returned to a more kinetic posture, exchanging tit-for-tat strikes after roughly a month of negotiations that quieted the region.
Shipping through the Strait of Hormuz, which before the war was responsible for roughly 20% of crude oil flows, has remained severely constrained as shippers weigh the benefits of shipping their product against the risk of harm to crew and cargo.
“Oil investors are expressing their view about the impact of the latest bout of escalation in the Middle East in an unambiguous way,” said Tamas Varga, an analyst at PVM Oil Associates. “They are voting with their dollar, and this vote strongly indicates that unless the Strait of Hormuz re-opens, and oil starts flowing again uninterruptedly, supply will not be aligned with demand in the foreseeable future.”
At the same time, the global energy market is facing pressures on multiple fronts outside Iran.
To the west, attacks in recent days by the Houthi militant group on Saudi Arabian energy infrastructure have resurfaced worries that the several million barrels per day the kingdom is moving through the Red Sea — a key workaround for the Strait of Hormuz — could be threatened.
To the north, strikes by the Ukrainian military inside Russia have effectively targeted Moscow’s refining sector, shuttering capacity in a crucial market that, prior to 2022, was responsible for roughly 10% of the world’s diesel exports. And to the east, data shows early signs that China — the world’s swing buyer of crude oil — has begun to step up its crude imports. The country’s slowdown in import volumes throughout the war has acted as a key lever to keep global pricing contained.
