Oil nears $100 as fresh Middle East strikes raise supply risks

Oil prices skyrocketed for the fourth consecutive day on Wednesday, surging over $1 in initial trading after fresh Middle East strikes raised concerns about potential supply disruptions. Brent crude futures surged 1.4% to $99.33 per barrel, while US West Texas Intermediate crude climbed 1.4% to $94.34 per barrel. Brent crude prices have jumped by a quarter since early August as hopes for a permanent resolution to the six-month-old war faded and new violence erupted, pushing prices near the crucial $100-a-barrel threshold.

The Middle East conflict escalated on Tuesday with Houthis in Yemen launching attacks on several Saudi cities, drawing the United States into the conflict. In response, US forces targeted multiple Iranian oil tankers, while Iran retaliated by hitting a US base in Jordan. Iran warns of further "economic warfare" tactics.

These recent developments only serve to reinforce the view that a resumption of peace talks remains uncertain, with ING analysts stating that the market is likely to continue pricing in a substantial risk premium. The latest attacks threaten to exacerbate disruptions to Middle East oil supplies, already strained by prior strikes on regional energy infrastructure and vital shipping lanes. Iran has threatened further US economic retaliation, and missile strikes, as Houthis continue targeting Saudi Arabia.

Saudi Arabia has diverted some oil exports away from the Strait of Hormuz, but sustained attacks on the kingdom could complicate efforts to maintain a steady flow of crude to global markets. Analysts warn that Iran's attacks on Saudi energy facilities, along with the destruction of five Iranian tankers, have heightened concerns about another prolonged disruption to oil supplies.