Oil Prices Hit Six-Week High as U.S.-Iran Tensions Escalate

Oil prices climbed to six-week highs on Thursday, marking a fourth consecutive day of gains as escalating military actions in the Middle East fueled investor concerns about potential disruptions to global energy supplies.

By 1327 GMT, international benchmark Brent crude futures had risen 0.62%, or 59 cents, to $96.22 a barrel, according to Reuters data. U.S. West Texas Intermediate (WTI) crude futures saw a larger increase, gaining 0.86%, or 78 cents, to trade at $91.79 a barrel.

Geopolitical Risk Fuels Rally

The immediate catalyst for the price surge was a significant escalation in hostilities between the United States and Iran. The market is reacting to U.S. strikes across Iran on Tuesday night, which an Iranian health minister said killed 18 people and wounded 108. The Iranian Red Crescent reported separate casualties from a strike near the Strait of Hormuz, a critical chokepoint for global oil shipments.

Adding to market jitters, Israeli Defence Minister Israel Katz issued new warnings that Israel would "cripple" Iran’s military and energy infrastructure if attacked. Analysts noted that these direct threats against energy facilities contributed to the upward pressure on prices.

Focus on Strait of Hormuz

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Fears of a supply disruption are materializing in shipping data. Preliminary figures showed that the number of commodity vessels transiting the Strait of Hormuz fell to six on Wednesday, down from 11 the previous day and well below the 10-day average of approximately 13.

"The oil market remains tight, with oil inventories still declining globally translating into higher prices," said UBS energy analyst Giovanni Staunovo. "Some support might have also come from ongoing tensions in the Middle East."

In a counter-development, Iraq increased its oil exports in August to around 2.34 million barrels per day from 1.35 million in July, with officials expecting September volumes to rise further after Iran granted passage approvals for Iraqi tankers through the strait.

Broader Market Implications

The sustained rise in energy costs is renewing concerns about persistent inflation. The market is now pricing in a higher probability of an interest rate hike by the U.S. Federal Reserve this month as policymakers weigh the impact of rising oil on the broader economy.