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

Oil prices climbed for a fourth consecutive day on Wednesday, climbing more than $1 early in the trading session. This surge came after a fresh series of attacks in the Middle East increased concerns about potential disruptions to supply. Brent crude futures increased by 1.4% to $99.33 a barrel, while U.S. West Texas Intermediate crude rose 1.4% to $94.34 a barrel.

Brent crude prices have risen by a quarter since the beginning of August as hopes for a lasting end to the six-month war have faded, and fighting has resumed. The conflict escalated on Tuesday when Iranian-backed Houthis in Yemen launched strikes on several Saudi cities, further dragging a U.S. ally into the fray. In response, U.S. forces targeted several Iranian oil tankers, while Iran retaliated by striking a U.S. base in Jordan.

Analysts from ING noted that recent events only strengthen the belief that a restart in peace talks is still some distance away, and until then, the market is likely to continue pricing in a significant risk premium. The latest attacks could exacerbate already strained Middle East oil supplies, already compromised by strikes on regional energy infrastructure and crucial shipping lanes.

While Saudi Arabia has redirected some exports away from the Strait of Hormuz, any persistent attacks on the kingdom could complicate efforts to maintain crude flow to global markets, according to analysts. OCBC analysts highlighted that Iran's attacks on Saudi energy facilities, combined with the destruction of five Iranian tankers, have raised concerns about further prolonged disruptions to oil supplies.