Middle East Tensions Fuel Surge in Oil Prices as US-Iran Confrontation Escalates

Oil prices surged over 4% on Wednesday as tensions in the Middle East escalated following US and Saudi strikes in Iraq and an intercepted Iranian missile attack on US forces.

The United States and Saudi Arabia launched strikes on Iran-backed groups in Iraq, blaming them for drone attacks on Saudi oil facilities. This move came hours after the US military said it had averted a surprise Iranian attack on US troops in the region.

Iran has ruled out Oman's proposal for regional joint management of the Strait of Hormuz, scuppering hopes for a resolution to the impasse that has choked off Gulf trade for months. Only a few commodity ships have transited through the Strait of Hormuz so far this week, even as five transited through the Bab el-Mandeb strait on Wednesday and 39 on Tuesday.

UBS analyst Giovanni Staunovo said renewed military strikes in the Middle East and Iranian officials reiterating that they want to control shipping activity through the Strait of Hormuz amid depressed oil flows are lifting oil prices again. Brent futures rose $3.72, or 4.4%, to $87.81 a barrel by 1025 GMT, while US West Texas Intermediate (WTI) crude gained $3.43, or 4.3%, to $82.69 a barrel.