Oil Prices Spike to Nearly Four-Month High Amid Middle East Tensions

Oil prices have surged to their highest level in nearly four months, reaching above $100 per barrel for the first time since mid-May. Brent crude futures rose by 81 cents to $108.44 a barrel, while U.S. West Texas Intermediate crude increased by 69 cents to $103.17 a barrel.

The rally is largely driven by increasing attacks on key shipping routes in the Middle East, which have fueled fears of prolonged disruptions to supplies. The Strait of Hormuz remains restricted, with flows well below pre-war levels. Analysts warn that the situation is fragile and subject to further escalation.

U.S. diesel prices have surpassed $6 a gallon for the first time ever, driven by supply disruptions due to the U.S.-Iran war and Ukrainian attacks on Russia's refineries. The impact of these events will be closely watched, particularly in China, which is the world's largest crude importer.

Analysts are divided on whether oil prices can stabilize below $120 or whether further supply disruptions will push crude into a new price regime. Tony Sycamore from IG predicts that WTI crude may retest its high of $119.48 from early March, while Priyanka Sachdeva from Phillip Nova notes that physical flows are crucial in determining the next leg in oil prices.