Brent crude approached $100 a barrel this week as fresh Middle East strikes rattled supply lines, before easing on Friday as Gulf states and Iran weighed a diplomatic meeting over the Strait of Hormuz. Analyst Priyanka Sachdeva says the $100 level is more than a psychological marker for the broader economy.
Brent crude rose 1.3% to $99.22 a barrel on Wednesday, its highest level since July. U.S. West Texas Intermediate crude climbed 1.2% to $94.13 a barrel over the same stretch, as escalating attacks across the Middle East deepened fears of a prolonged disruption to regional supplies.
Strikes intensify across the Middle East
Iranian-backed Houthis in Yemen launched strikes on several Saudi cities on Tuesday, further drawing in a U.S. ally. In a sharp escalation of the six-month-old war, U.S. forces hit multiple Iranian oil tankers, and Iran targeted a U.S. base in Jordan and attacked ships. Brent crude has climbed by a quarter since early August as hopes for a permanent resolution to the conflict faded and fighting flared again. Saudi Arabia has diverted some exports away from the Strait of Hormuz, but analysts said sustained attacks on the kingdom could still complicate efforts to keep crude flowing to global markets.
A warning level for the economy
Priyanka Sachdeva, head of market insights at Phillip Nova, said bullish momentum is building as Brent approaches the $100 mark. Sachdeva added: "It is a warning level for the broader economy". Analysts also said higher oil prices have stoked inflation fears, especially in Asia, where many economies depend heavily on imported energy. OCBC analysts said Iran's attacks on Saudi energy facilities and the destruction of five Iranian tankers raised concerns about another prolonged disruption to supplies.
Hopes for a Hormuz meeting cool the rally
Prices turned lower on Friday, however, as Gulf states weighed a meeting with Iranian officials over the future of the Strait of Hormuz. Brent fell 2.7% to $104.70 a barrel, wiping out some of the previous day's 6% rise. The Financial Times reported the meeting is scheduled for Monday in the Omani coastal city of Salalah, between top diplomats from the six-member Gulf Cooperation Council and a senior Iranian official — the first such contact since the US-Israel war on Iran began in February. Despite Friday's pullback, oil is still up almost 9% this week, its biggest weekly jump since July.
Sources: Commodities & Futures News, Business | The Guardian
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