Fears of an Extended US-Iran Conflict Boost Crude Oil Prices

Crude oil prices jumped on October due to escalating hostilities between the US and Iran, raising concerns about potential disruptions to energy flows through the Strait of Hormuz. The US carried out a second round of strikes in three days targeting Iran's southern coast, while Iran retaliated with drone and missile attacks on US bases in the Middle East.

However, gains in crude prices were limited after the US reported that over 17 million barrels of oil passed through the Strait of Hormuz on Monday, easing supply concerns.

US Energy Secretary Scott Bessent suggested that a stronger yen may be coming as US bond selloff accelerates. The International Energy Agency (IEA) also reported that the global oil supply deficit would worsen in Q3, due to ongoing disruptions from the US-Iran conflict. This was supported by the fact that Russian crude production could be further disrupted due to intensified drone and missile attacks by Ukraine on Russian energy infrastructure.

OPEC delegates approved a final increase of +188,000 bpd in crude production for September, but this may prove difficult to achieve amid renewed US-Iran military attacks in the region. US crude oil inventories were higher than expected, while gasoline inventories were lower than expected. Despite this, crude oil prices remained high due to the ongoing tensions between the US and Iran.