Global oil prices have breached $95 a barrel for the first time in six weeks as escalating conflict in the Middle East threatens to disrupt critical supply routes. Brent crude reached $95.24 on Wednesday, a 3% daily increase, driven by renewed hostilities near the Strait of Hormuz and threats against tankers in the Bab el-Mandeb strait, according to market data.
Supply Risks at the Strait of Hormuz
The recent price surge follows 11 nights of strikes on Iranian infrastructure, including drone storage sites and aircraft hangars. These military actions have reignited fears of a supply bottleneck at the Strait of Hormuz, a critical maritime chokepoint for global energy exports. Analysts at Goldman Sachs project that if exports through the strait do not resume, global oil prices could reach $120 a barrel by the end of the year.
Did you know?
The current conflict has already cost the United States billions, according to statements by Donald Trump.
Market Volatility and Cushioning Factors
International Energy Agency (IEA) head Fatih Birol warned that while the market has been supported by “cushioning factors,” there is no room for complacency. These factors include the release of approximately 400 million barrels of emergency reserves by IEA members and the efforts of Saudi Arabia and the United Arab Emirates to continue exporting crude via alternative routes.
Despite these measures, the market remains strained. While crude delivery volumes have seen some stabilization, refinery production has lagged. Birol noted that markets for refined products like diesel and gasoline are currently “considerably tighter” than those for crude oil, as global refineries have cut production.
Infrastructure Targets and International Law
The conflict has increasingly shifted toward civilian infrastructure, with both sides seeking leverage through tactical strikes. Iran has targeted energy facilities and water desalination plants in neighboring Gulf countries, actions that United Nations Secretary-General António Guterres described as “unacceptable” on Tuesday. Under international law, such strikes are generally prohibited unless the infrastructure is actively serving a military purpose.
The economic impact of the price volatility is already visible in corporate earnings. Equinor, the Norwegian state oil company, reported that its profits nearly doubled to $11.5 billion in the three months to the end of June, largely due to the sustained rise in oil and gas prices linked to the regional instability.
Future Outlook and Energy Security
The outlook for the coming months remains linked to the status of the Strait of Hormuz. While increased exports from the US and Canada have offset roughly 70% of the lost Gulf gas supply, availability is expected to tighten further as European nations attempt to refill storage facilities ahead of winter. According to Birol, a full and unconditional reopening of the strait is essential to prevent further deterioration in global energy security.
Frequently Asked Questions
Why are oil prices rising now?
Prices are rising due to heightened military conflict between the US and Iran, which threatens to block oil transit through the Strait of Hormuz.
How have countries kept prices from spiking further?
IEA members released 400 million barrels of emergency reserves, and major producers like Saudi Arabia and the UAE have utilized alternative export routes.
What is the risk to refined fuels?
Refinery activity has not kept pace with crude deliveries, leading to supply tightness for essential products like gasoline and diesel.
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