Middle East Conflict Drives Oil Prices Higher Amid Supply Disruptions
Oil prices took a breather on Friday after surging more than 25% over two weeks, despite ongoing supply disruptions in the Middle East. The conflict between the US and Iran has led to inflationary jitters, reflected in rising US Treasury yields as traders dump government bonds and anticipate Federal Reserve interest rate hikes.
The global oil benchmark, Brent crude, dipped 4.2% to $96.46 a barrel, while WTI crude fell 3.2% to $89.22 a barrel. Since July 10, the former contract has soared 26.9%, and the latter has jumped 25.1%. The resurgence in oil prices this month follows the breakdown of the interim peace deal between the US and Iran.
The Houthi militants in Yemen have launched attacks on Saudi Arabian tankers in the Red Sea, posing a threat to ships transiting the Bab el-Mandeb Strait. Brent topped $100 a barrel for the first time since May in the previous session due to these developments.
Adam Turnquist, chief technical strategist at LPL Financial, noted that oil's rebound reflects more than renewed geopolitical anxiety. Improving technical momentum, crowded bearish positioning, pressure on two critical shipping routes, and historically low strategic inventories have all made the market more sensitive to supply disruptions.