RAS TANURA, SAUDI ARABIA – Oil prices experienced a notable increase amid rising tensions in the Middle East that could potentially disrupt oil supply from the region. The escalation of conflict was triggered by Iran’s launch of ballistic missiles towards Israel, stirring concerns of a broader war.
On Wednesday, Brent futures saw a surge of 1.13% to $74.39 a barrel, while U.S. West Texas Intermediate crude rose by 1.26% to $70.71 a barrel, following a more than $1 spike earlier during the trading session. The previous day, both crude benchmarks had soared over 5% in response to the heightened geopolitical tensions.
Iran’s aggressive action, firing over 180 ballistic missiles at Israel in retaliation for Israeli military operations targeting Tehran’s Hezbollah allies in Lebanon, has raised fears of potential disruptions to oil supplies given Iran’s significant role as an oil producer in the region. With Iran being a key member of the Organization of the Petroleum Exporting Countries (OPEC), there are concerns regarding the impact on global oil output.
Israeli Prime Minister Benjamin Netanyahu vowed that Iran would face consequences for its missile attack, prompting threats of substantial retaliation from Tehran. U.S. President Joe Biden expressed unwavering support for Israel, a longstanding ally, as the United Nations Security Council convened a meeting to address the escalating tensions in the Middle East.
Experts have highlighted the risk of further escalation, with the possibility of the U.S. becoming involved in the conflict. While Iran accounts for approximately 4% of global oil production, the potential disruption of Iranian supplies may lead to increased pressure on major oil producer Saudi Arabia to boost output.
Later that day, a panel comprising ministers from OPEC and its allies gathered to evaluate the market situation, with no immediate policy changes anticipated. However, OPEC+ members, including Russia, are scheduled to gradually increase output by 180,000 barrels per day starting in December.
Amid the rising tensions and potential supply disruptions, the fluctuating U.S. stockpile data added another layer of uncertainty to the oil market. Reports indicated a drop in crude oil and distillate inventories alongside a rise in gasoline inventories, based on figures from the American Petroleum Institute.