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

Oil prices surged for a fourth consecutive day on Wednesday, climbing more than US$1 in early trading following heightened fears of supply disruptions due to fresh attacks in the Middle East. Brent crude futures surged 1.4 percent, reaching US$99.33 a barrel, while US West Texas Intermediate crude rose 1.4 percent to US$94.34 a barrel.

Brent crude prices have increased by nearly a quarter since early August as hopes for a lasting resolution to the six-month-long war diminished and as fighting resumed, approaching the crucial US$100-a-barrel threshold.

The Middle East conflict escalated on Tuesday with Iranian-backed Houthis based in Yemen launching strikes against several Saudi cities, further entangling a US ally in the conflict. In retaliation, US forces targeted multiple Iranian oil tankers, and Iran retaliated by striking a US base in Jordan. These recent events only serve to reinforce the notion that a resumption of peace talks remains uncertain. In the meantime, the market is expected to continue pricing in a substantial risk premium, according to ING analysts.

The latest attacks exacerbate the threat of further disruptions to 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, sustained attacks on the kingdom could complicate efforts to maintain a steady flow of crude to global markets, as noted by analysts.

Iran's strikes on Saudi energy facilities and the subsequent destruction of five Iranian tankers have heightened concerns about another prolonged disruption to oil supplies.