Oil prices settle up more than US$4 a barrel on renewed US-Iran fighting

Oil prices surged more than US$4 per barrel on Tuesday (Sept 1), reaching a five-week high, as traders anticipated further Middle East supply disruptions following renewed US-Iran fighting. Brent futures climbed US$4.16, or 4.6%, to US$94.65 per barrel, while US West Texas Intermediate (WTI) crude rose US$4.46, or 5.2%, to US$90.22. This marked the highest close for Brent since July 24 and for WTI since July 23.

The US launched new air strikes on Iranian targets, dispelling hopes that the weekend exchange of fire might preclude a wider resumption of hostilities. Reports of two tankers hit, leaving the Strait of Hormuz, the vital oil supply waterway controlled by Iran, contributed to the price surge. Teheran remained defiant, warning it would impede oil exports from the Gulf, despite US President Donald Trump threatening retaliation and US Treasury Secretary Scott Bessent warning of forthcoming sanctions.

Saxo Bank analyst Ole Hansen pointed out that the fresh hostilities heightened concerns about prolonged disruptions to energy flows through the Strait of Hormuz. Disruptions at refineries worldwide, particularly in the Middle East and Russia, have already driven diesel prices to a 52-week high, with US diesel futures jumping 51% over the past 10 weeks and refining profit margins reaching a record US$107 per barrel.

Meanwhile, Russia, the world's third-largest crude oil producer, launched airstrikes on Ukrainian capital Kyiv, marking the sixth day of intense strikes. This development prompted analysts to monitor weekly storage reports from the American Petroleum Institute and the US Energy Information Administration, with estimates suggesting a decline in crude oil inventories for the week ended Aug 28, the first drop in five weeks since early August 2025.