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

Oil prices climbed for the fourth consecutive day, surging more than $1 in early trading on Wednesday following new attacks in the Middle East that raised concerns about potential supply disruptions. Brent crude futures increased by 1.4% to $99.33 a barrel by 0212 GMT, while U.S. West Texas Intermediate crude rose 1.4% to $94.34 a barrel. Since early August, Brent crude prices have risen by a quarter, fast approaching the critical $100-a-barrel threshold.

The Middle East conflict escalated on Tuesday when Iranian-backed Houthis in Yemen targeted several Saudi cities, further entangling a U.S. ally in the ongoing conflict. In response, U.S. forces launched strikes against multiple Iranian oil tankers, and Iran retaliated by targeting a U.S. base in Jordan.

Experts noted that these recent developments only serve to reinforce the view that a restart in peace talks remains uncertain. Until then, market participants are likely to continue pricing in a substantial risk premium, according to ING analysts. The latest attacks threaten to exacerbate supply disruptions in the Middle East oil market, which are already strained by prior strikes on regional energy infrastructure and critical shipping lanes.

While Saudi Arabia has diverted some exports away from the Strait of Hormuz, sustained attacks on the kingdom could complicate efforts to maintain a steady flow of crude to global markets, according to analysts. OCBC analysts emphasized that Iran's strikes on Saudi energy facilities, coupled with the destruction of five Iranian tankers, have heightened worries about another prolonged disruption to oil supplies.