Oil Prices Rise Following US and Iran Strikes and Supply Concerns

Oil Prices Extend Gains Amid West Asia Conflict

Oil prices rose by nearly 1 per cent in early trade on Wednesday, extending a surge from the previous session. The upward movement followed overnight strikes exchanged between the United States and Iran, which intensified concerns over global supply disruptions and dampened hopes for an easing of tensions in West Asia.

Brent crude futures rose 87 cents, or 0.92 per cent, to $95.52 a barrel by 00:08 GMT. Meanwhile, US West Texas Intermediate crude futures climbed 80 cents, or 0.91 per cent, to $91.02. Both contracts had previously soared more than $4 on Tuesday, marking Brent's largest gain since July 24 and WTI's largest since July 23.

Escalation and Impact on Shipping Lanes

The latest price increases followed a series of US airstrikes against targets in Iran and an ensuing Iranian response, marking the most serious escalation of the conflict in weeks. United States Central Command stated that the strikes were a response to recent attempted attacks by the Islamic Revolutionary Guard Corps (IRGC) against commercial shipping in the Strait of Hormuz and against American service members in the region.

In response, the IRGC stated that the US attacks would further restrict traffic through the Strait of Hormuz. The critical waterway previously carried about one-fifth of global oil consumption before the conflict and has been effectively closed to commercial shipping by Iran.

The conflict also expanded to regional infrastructure. The IRGC claimed it targeted a US military base in Jordan with ballistic missiles, resulting in a large number of casualties among US forces, while Iranian state media reported a large-scale drone attack on a US base in Bahrain. However, Jordan's military reported that its air defences intercepted 10 of 13 ballistic missiles entering its airspace, and two US officials stated that no American casualties had been reported from the attacks. Additionally, Kuwait's armed forces reported responding to hostile drone activity.

Supply Pressures and US Inventories

The recent exchange followed a weekend flare-up in hostilities, which were the first since July. These events came after attacks on two tankers departing the Strait of Hormuz on Monday, causing further disruptions to oil supplies and forcing traders to seek alternative crude shipments.

Meanwhile, data from the American Petroleum Institute cited by market sources showed that crude inventories in the United States, the world's largest oil producer, fell by 2.6 million barrels in the week ended August 28. Distillate stocks, which include diesel and heating oil, declined by 265,000 barrels over the same period.

"Geopolitical tensions in key shipping regions like the Strait of Hormuz immediately impact global energy markets, creating supply uncertainties that ripple across industries. For businesses and logistics operations worldwide, volatility in crude oil prices underscores the importance of supply chain resilience and proactive risk management during periods of geopolitical instability." — Dr. Shishir Gupta, Founder & CEO, StartupLanes