Middle East Tensions Drive Oil Prices to Multi-Week Highs

Oil prices have surged to multi-week highs as tensions in the Middle East continue to escalate. Brent crude futures rose by $1.25, or 1.3%, to $98.25 a barrel at 09:30 a.m. Saudi time, while US West Texas Intermediate crude was up $2.22, or 2.4%, to $93.70 a barrel.

The increase in oil prices is attributed to the risks of a prolonged conflict between the US and Iran. On Monday, Iran threatened to retaliate against any new US attacks on its assets, heightening worries over supply disruption. The country also fired an advanced missile at US warships and Iran-backed Houthis struck several Saudi cities, wounding 73 people and causing some energy facilities to halt operations.

Analysts believe that the recent escalation of the Middle East conflict has increased the likelihood of a prolonged standoff between the US and Iran. This could see Persian Gulf supply remain constrained through the rest of 2026, with a full return to pre-war throughput expected in late Q1 or early Q2 2027.

Goldman Sachs raised its Brent and WTI price forecasts by $5 to $85 and $80, respectively, for December 2026 and to $80 and $75, respectively, for 2027. The bank's analysts assume that Middle East shipping disruptions will continue into 2027.