Oil Prices Fail to Reflect Escalating Global Tensions

Oil prices have surged over the past three weeks, with Brent climbing from its monthly low of $70 to $100 on Thursday. West Texas Intermediate (WTI) has jumped from $67.20 to $93.50 during this period.

The ongoing US-Iran and Russia-Ukraine conflicts should fundamentally be driving oil prices higher, but they're not. Strategists are surprised that oil prices aren't even higher given these escalating tensions.

The US-Iran war has escalated with no end in sight. Iranian leaders rejected a ceasefire proposal delivered by Iraq's prime minister, believing they can withstand US attacks. A prolonged war will lead to supply issues as traffic through the Strait of Hormuz dwindles, particularly with the Houthis attacking Saudi Arabia and Russia rationing fuel.

Crude oil inventories have dropped significantly in recent months, with US Strategic Petroleum Reserves at their lowest level since the 1980s. However, despite these developments, oil prices remain in a bear market after falling by over 20% from the highest levels this year.