Middle East governments urged to launch stimulus packages amid energy shock, inflation

Oil prices reached US$110 a barrel for the first time since May on Friday (Oct 16) due to concerns over escalating tensions in the Middle East and disputes over Russia's supply capabilities. Brent crude futures settled at US$109.86, the highest since May 19, while US WTI crude futures closed at US$101.41, their highest level since September 17.

Energy consultancy firm Energy Aspects attributed the price surge to fears of attacks on Saudi energy infrastructure, citing reports suggesting Iran might launch a pre-emptive strike following military movements detected by Western intelligence. The Saudi-led coalition intercepted and destroyed a ballistic missile heading towards the Red Sea port of Yanbu, which is crucial for Saudi Arabia's oil exports.

However, initial reports from Rapidan Energy Group indicated no damage to Yanbu's infrastructure. Supply worries mounted as attacks around the Strait of Hormuz intensified, with Iran reportedly stepping up strikes in response to US sanctions and a blockade of its ports. Kpler analysts warned of a slower and uneven recovery in Hormuz flows without a political resolution.

Meanwhile, Ukraine struck a Russian oil refinery on Thursday after the Ukrainian president announced the end of a ceasefire covering energy sites. Russia's Ryazan oil refinery temporarily halted operations following a drone attack in the area. To alleviate the supply crunch, the International Energy Agency agreed to release more than 20 million barrels of fuel, and the US requested proposals for an exchange of up to 17 million barrels of crude oil from its Strategic Petroleum Reserve.