Oil prices continued to rise as concerns about supply disruptions intensified following reciprocal attacks by the US and Iran
Oil prices rose early Wednesday, extending gains from the previous session, as concerns about supply disruptions intensified following overnight reciprocal attacks by the US and Iran.
The US-Iran conflict escalated overnight, diminishing hopes for a rapid de-escalation of tensions in the Middle East. The market's focus remains on supply disruptions.
Brent crude futures rose $1.03, or 1.1%, to $95.68 a barrel as of 06:05 GMT, while WTI crude futures rose 61 cents, or 0.7%, to $90.83.
Both contracts rose more than $4 on Tuesday, with Brent oil recording its biggest gain since July 24 and WTI oil its biggest gain since July 23.
The US announced it had carried out a series of airstrikes on targets in Iran overnight, prompting a response from Tehran. This marked the most serious escalation in weeks of conflict between the two countries.
The Iranian Revolutionary Guard said US attacks would further restrict transit through the Strait of Hormuz.
Recent developments have brought renewed concerns about risks to regional oil supply. Despite the US-Iran impasse, some oil has continued to flow through the Strait of Hormuz, but rising tensions are clearly putting transit at risk.
Iran reported targeting a US military base in Jordan with ballistic missiles, killing numerous US soldiers, and launched a large-scale drone attack on a US base in Bahrain.
The Jordanian military said 10 of 13 ballistic missiles that entered its airspace were intercepted by air defense systems, while two US officials stated that no American casualties have been reported so far.
The Kuwaiti Armed Forces also said they responded to hostile drone activity.
The latest clashes, which escalated hostilities over the weekend for the first time since July, and the attacks on two tankers leaving the Strait of Hormuz on Monday, have caused further disruptions to oil supplies. Therefore, traders are forced to turn to alternative methods of crude oil delivery.
The oil market is no longer just pricing in the risk of war; it is increasingly pricing in the cost of an unresolved conflict.
Until there is clear evidence that negotiations can produce a lasting solution and that normal oil flows through the Strait have returned, the risk premium on crude oil will remain high.
Meanwhile, according to data from the American Petroleum Institute, in the U.S., the world's largest oil producer, crude oil inventories fell by 2.6 million barrels in the week ending August 28, while distillate fuel inventories, including diesel and heating oil, decreased by 265,000 barrels.
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