Brent Crude Pushes Towards $100 as US-Iran Tensions Escalate

Oil prices surged on Wednesday as tensions between the US and Iran escalated, pushing Brent crude towards $100 a barrel. The latest exchange of strikes has revived fears that energy flows through the Strait of Hormuz could deteriorate further.

The price of Brent crude traded around $95.50-$96 a barrel in Asian hours, while West Texas Intermediate held near $91 after both benchmarks surged more than 4% on Tuesday. WTI is trading at its highest since late July.

The renewed fighting has reversed the tentative improvement in sentiment seen during recent diplomatic efforts and increased the risk that disruption through Hormuz lasts longer than previously expected. Iran's Revolutionary Guards have warned that traffic through Hormuz could face additional restrictions.

Commerzbank Research analysts said the supply problem is not confined to the Middle East, citing Russia's extension of its diesel export restrictions through September as a significant factor. This measure adds another layer of stress to global middle-distillate markets at a time when Persian Gulf disruptions are already constraining supply.

ING commodity strategists Warren Patterson and Ewa Manthey wrote that reported crude flows through the strait had recovered towards 6 million-8 million barrels a day in recent weeks, although they estimate the average closer to 5 million. The US Energy Secretary Chris Wright said Venezuela's output could more than double from roughly 1.1 million-1.2 million barrels a day over the next several years.