Oil Prices Rally to Three-Week Highs on Middle East Supply Fears
Oil prices surged to their highest levels in three weeks, marking a fifth consecutive day of gains. Brent crude futures for October delivery climbed $2.44, or 2.7%, to $94.06 a barrel, while U.S. West Texas Intermediate (WTI) crude futures for September rose $1.84 to $87.67 a barrel. The more-active October WTI contract increased $2.41, or 2.9%, to $86.80. Analysts attributed the rise to ongoing concerns over supply disruptions in the Middle East due to the unresolved Iran war.
The United Arab Emirates' decision to suspend all financial and economic transactions with Iran has heightened tensions in the region. Analysts noted that the market remains cautious, with sporadic attacks in the Middle East supporting elevated oil prices. However, there is no fresh momentum without a major escalation, according to Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment.
U.S. President Donald Trump warned of economic consequences for any country providing support to Iran, further complicating the geopolitical landscape. Shipping traffic through the Strait of Hormuz remained unchanged, with discussions to end the conflict deadlocked. The war has significantly impacted the supply of refined fuels, leading to a drawdown in inventories.
The Energy Information Administration reported that U.S. stockpiles of distillate fuel, including diesel and heating oil, fell for a third week. However, crude inventories unexpectedly rose by 4.4 million barrels, adding complexity to the market outlook.