Oil rises as risks of prolonged Mid-East conflict heighten supply worries

Oil prices continued to rise on September 8 following heightened concerns about a prolonged conflict in the Middle East. Brent crude futures increased by 34 cents, or 0.35%, to $97.34 per barrel, while US West Texas Intermediate crude climbed by $1.15, or 1.26%, to $92.63 per barrel. Brent's price reached its highest level since July 24 in the previous session, as traders added a risk premium to prices due to growing tensions around the Strait of Hormuz, a crucial route for global crude shipments.

Iran had warned on September 7 that energy infrastructure across the Gulf, including US oil and gas interests, was vulnerable. This followed a series of tit-for-tat strikes over the weekend, with no progress towards a diplomatic resolution. On September 5, US forces had attacked three Iranian oil tankers, including one near Kharg Island, Iran's main oil export hub, according to US Central Command. The strikes came after Iran's Revolutionary Guards had targeted US warships in the region.

Analyst Daniel Hynes from ANZ noted that the recent escalation of the Middle East conflict had increased the likelihood of a prolonged standoff, punctuated by calibrated military action by the US and Iran. This could result in Persian Gulf supply constraints lasting until the end of 2026 or even early 2027. Goldman Sachs had raised its Brent price forecast by $5, to $85 for December 2026 and to $80 for 2027, reflecting its assumption that Middle East shipping disruptions would continue into 2027.

Ed Meir, an analyst at Marex, stated that crude oil prices were likely to remain elevated through the end of 2026 as long as the war persists, given the numerous unresolved issues.