Oil prices are rising as supply concerns increase amid expectations of a prolonged conflict in the Middle East
Oil prices reached their highest levels in recent weeks on Tuesday as the risk of a prolonged conflict in the Middle East increased and concerns about supply disruptions intensified following Iran's threat of retaliation for US attacks.
Analysts say that rising tensions could restrict supply in the Gulf and keep oil prices at risk until 2027. Crude oil prices are expected to remain at high levels until the end of the year.
Brent crude futures rose $1.25, or 1.3%, to $98.25 a barrel as of 06:30 GMT. WTI crude traded at $93.70 a barrel, up $2.22, or 2.4%.
Brent crude previously surged to $98.79 per barrel, its highest level since July 24, while WTI crude reached $94.21 per barrel, its highest level since June 8.
Following the Labor Day holiday in the US on Monday, WTI is trying to catch up with Brent, which absorbed the impact of the weekend tensions a day earlier.
Overall, recent tensions between the US and Iran have the potential to significantly alter market perceptions of risks to oil prices, not just for the remainder of 2026, but into 2027.
The US threatened Iran with "economic warfare." Iran did not back down and announced it had launched an advanced missile at US warships, demonstrating its military might. Iranian-backed Houthi militias attacked several cities in Saudi Arabia, injuring 73 people and disrupting operations at some energy facilities.
According to the US Central Command, US forces attacked three Iranian oil tankers on Saturday. The attacks followed those of the Iranian Revolutionary Guard Corps against US warships operating in the region.
All of this has raised the risk of a wider escalation.
The recent escalation of the Middle East conflict has increased the likelihood of a prolonged stalemate, punctuated by gradual military actions by the US and Iran. This could lead to limited oil supply in the Persian Gulf until the remainder of 2026.
A full return to pre-war trading volume is not expected until late first or early second quarter of 2027.
Following Iran's threat on Monday to retaliate against new US attacks, shipping traffic through the Strait of Hormuz also slowed earlier this week.
Given the numerous issues yet to be addressed, crude oil prices are likely to remain high until the end of the year as long as the conflict continues.
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