Middle East Tensions Send Oil Prices Soaring
Oil prices have surged by over 3% on Monday, reaching multi-month highs as concerns about supply disruptions in the Middle East persist. The recent attacks on Saudi Arabia's east-west pipeline and increased hostilities in the region have raised fears of a prolonged supply crunch, pushing oil prices up to $103 for WTI and $107 for Brent.
The pipeline was suspended after the attack, leaving 4% of global supply without an alternative route. The Strait of Hormuz, a critical shipping lane, has also seen extremely low levels of vessel traffic due to ongoing disruptions.
Meanwhile, US diesel prices have crossed the $6 per gallon mark for the first time, with Commerce Bank raising its year-end forecast to $1,200 per tonne from $950. The elevated oil prices are translating into higher inflationary pressures in the real economy.