The global price of oil has risen to its highest level in seven months due to concerns about potential supply disruptions in the Middle East. Brent crude climbed to $89 a barrel, while West Texas Intermediate rose to $85 a barrel. Prices for both benchmarks have increased significantly since the beginning of the year, leading to fears of a further rise in gasoline prices in the United States and elsewhere. Richard Bronze of Energy Aspects attributed the price increases to ongoing geopolitical tensions in the Middle East, along with a slower-than-expected recovery in US oil production following disruptions caused by cold weather in January.
The recent airstrike on Iran’s embassy in Syria has escalated tensions in the region, with Iran and Syria accusing Israel of the attack. The Israeli military has not confirmed its involvement but believes the target was a military building of Iran’s elite Revolutionary Guards. Sophie Lund-Yates of Hargreaves Lansdown pointed to the geopolitical tensions in the Middle East and production cuts by OPEC+ as factors contributing to the rise in oil prices. There are concerns that further escalation in the conflict between Israel and Hamas could disrupt oil supply to global markets, as seen during a past peak in oil prices following a conflict in Gaza.
The potential for a regional conflict in the Middle East and disruptions to oil supply has put upward pressure on oil prices, with Brent prices nearing $92.40 a barrel. Capital Economics’ Bill Weatherburn noted that the war in Gaza has not yet significantly impacted oil supply, but there are worries that further escalation could involve major oil-producing countries in the region. Additionally, signs of increasing oil demand in China, as shown by the country’s official purchasing managers’ index, are seen as a positive development for the world’s second-biggest economy. This could further support oil prices as demand increases.
The ongoing attacks on Russian refineries in Ukraine, Houthi attacks on shipping in the Red Sea, and overall instability in the Middle East are contributing to a sense of supply shortage in the oil market. The slower-than-expected recovery in US oil production following weather-related disruptions is also impacting supply levels. This combination of factors has created a situation where supply is not meeting demand, leading to higher oil prices. The situation is further complicated by OPEC+ production cuts, which are adding pressure to prices and exacerbating concerns about potential supply disruptions in the Middle East.
The recent rise in oil prices is the result of a buildup of momentum over the past several weeks, with ongoing geopolitical tensions in the Middle East playing a significant role. Prices for both Brent and WTI benchmarks have increased by a significant margin since the beginning of the year, leading to fears of higher gasoline prices for consumers. The potential for further escalation in conflicts in the region, along with production cuts by OPEC+ and signs of increasing demand in China, are contributing to the upward pressure on oil prices. The situation highlights the vulnerability of the oil market to geopolitical events and supply disruptions, underscoring the importance of maintaining stability in key oil-producing regions.
