Oil tops $100 a barrel as Mideast conflict escalates

Oil prices surged past $100 a barrel on Wednesday, marking a historic milestone as Middle Eastern tensions escalated. The benchmark Brent crude futures breached the psychological level for the first time since July 24, climbing $2.15, or 2.2%, to $100.07 a barrel. US West Texas Intermediate crude followed suit, increasing $1.70, or 1.8%, to $94.73.

Since the onset of the six-month-long US-Iran conflict, Brent crude prices have risen by 25%, reaching their highest levels in recent months. Prior to Israeli and US strikes on Iran on February 28, oil was trading around $70 a barrel.

The situation worsened this week with Houthis, an Iran-backed group, targeting Saudi energy facilities, causing numerous installations to catch fire and raise concerns about potential supply disruptions. The threat of a Red Sea supply cut-off looms large, as the Red Sea serves as a crucial alternative route to the Strait of Hormuz, where crude flows have been significantly limited since the beginning of the Iran war.

Major banks, including Goldman Sachs, Bank of America, and HSBC, have adjusted their crude price forecasts upwards in recent days.

Before the recent escalation, approximately 8 million barrels per day (bpd) of oil were flowing through the Strait of Hormuz, more than double the volume from the preceding week. However, in recent days, the flow had dwindled below 2 million bpd. Despite non-OPEC oil producers like the United States, Canada, and Guyana boosting production, the International Energy Agency projected a 4.3 million bpd decrease in global oil supply this year, accounting for about 4% of the total.