Oil hits over 3-week high on Middle East supply concerns amid war impasse

Oil prices soared to three-week peaks on Thursday, fueled by apprehensions over a prolonged impasse in the Iran conflict potentially disrupting Middle Eastern supply. Brent crude futures for October delivery surged $2.19, or 2.39 percent, to $93.81 a barrel, while U.S. West Texas Intermediate crude futures for September added $2.33, reaching $88.16 a barrel.

The October WTI contract, which saw more trading activity, rose $2.44, or 2.89 percent, to $86.83. Both Brent and WTI benchmarks hit their highest level since July 24 and climbed for a fifth consecutive day. UBS analyst Giovanni Staunovo noted that Middle Eastern tensions persist, posing a continued risk of further supply interruptions.

Lower oil exports from the region are tightening the market once more. The UAE's suspension of all financial and economic dealings with Iran until further notice has brought renewed attention to the strained relationship between the Gulf Arab oil producer and Iran. Despite sporadic attacks, the market remains buoyed by a lack of major escalation, with a gradual upward trend anticipated due to ongoing uncertainties surrounding peace talks and tensions involving the UAE, Oman, and Iran.

U.S. President Donald Trump maintained that no talks were underway with Iran and that the Strait of Hormuz remained open, while Iran claimed the waterway remained closed. Trump vowed economic repercussions for any country providing aid to Iran. Shipping traffic through the strait remained unchanged following Wednesday's discussions to end the conflict, which are stalled.

Before the war that began with U.S. and Israeli strikes on Iran on February 28, Middle Eastern shipments accounted for about one-fifth of global consumption. Current flows are far below pre-war levels, and the war has impacted refined fuel supplies, drawing down inventories and leaving less crude available for refiners. U.S. stockpiles of distillate fuel, including diesel and heating oil, fell for a third week, while crude inventories unexpectedly rose by 4.4 million barrels.