Oil prices have surged nearly 1% in early trade on Wednesday, extending the previous session's surge as concerns over supply disruption intensified after the US and Iran exchanged fresh strikes overnight in the most serious escalation of the conflict in weeks. Brent crude futures rose 15 cents, or 0.2%, to $95.67 a barrel at 0100 GMT, while US West Texas Intermediate crude futures were up 26 cents, or 0.3%, at $91.56. Both contracts soared more than $4 on Tuesday, marking Brent's largest gain since July 24 and WTI's largest since July 3, with Brent crude futures up 7.1% for the week and WTI up 9.8% according to The Economic Times. The escalation followed recent attempted attacks by the IRGC against commercial shipping in the Strait of Hormuz and against American service members deployed to the region, according to The Economic Times. The United States said it carried out a series of overnight airstrikes on targets in Iran, triggering a retaliatory response from Tehran and marking the most significant escalation in hostilities between the two countries in several weeks. The Associated Press reported that the US military launched strikes against Iranian air defence systems, radar facilities, and maritime assets, citing American claims that Iranian actions had endangered US forces and commercial vessels.
Iran's Islamic Revolutionary Guard Corps (IRGC) said two oil tankers were disabled after hitting sea mines while attempting to transit the Strait of Hormuz, according to Iranian state media reports. The IRGC said the tankers had been forced to disembark their crews and were placed in the hands of US operatives while attempting to pass through what it described as an illegal route in the Strait. Al-Jazeera reported that IRGC Navy had previously warned vessels against using the mined passage, also warning that shipping companies choosing what it called an unauthorised route could face additional penalties. The development comes after a separate incident involving the SIDR vessel, where Saudi shipping company Bahri said two crew members were killed while the vessel was transiting the Strait of Hormuz on Monday. Both victims were from the Philippines. The incidents add to concerns over potential disruptions to one of the world's most important oil shipping routes, particularly as the US-Iran conflict shows signs of renewed escalation.
The IRGC warned that the US strikes would further hamper shipping through the Strait of Hormuz, a critical waterway that carried about one-fifth of the global oil consumed before the conflict and which Iran has effectively closed to commercial shipping. The IRGC also claimed responsibility for a ballistic missile attack on a US military base in Jordan, saying the strikes killed a large number of American personnel, while Iranian state media separately reported that drones had launched a large-scale attack on a US base in Bahrain in retaliation for the American strikes. Jordan's military said its air defence systems intercepted 10 of the 13 ballistic missiles that entered its airspace, while two US officials said there had been no reports of American casualties from the attacks so far. Separately, Kuwait said its armed forces were responding to hostile drone activity, as reported by The Economic Times. Israel indicated it was prepared to resume fighting if necessary and that an Iranian attack would free it from existing restrictions, raising the prospect of another cycle of military escalation. Israel Defence Minister Israel Katz renewed warnings that Israel would "cripple" Iran's military and civilian infrastructure, including energy facilities, according to The Hindu BusinessLine. Iran's General Staff and Khatam al-Anbiya Central Headquarters separately issued warnings of retaliation, with the spokesperson for the IRGC warning that the US would regret the new attacks, according to Doha News. Iran's military officials indicated that Tehran intended to respond to the latest American attacks, with the latest exchange following a month-long lull in direct military hostilities.
Average U.S. diesel prices hit record highs as renewed U.S.-Iran hostilities and Ukrainian attacks on Russian refineries increased supply disruptions. A gallon of diesel now costs $5.85 on average in the U.S., according to AAA data, with the price of diesel rising even further due to the sharp drawdown in inventories and as agricultural states head into harvesting and planting seasons. Diesel is a primary fuel for agricultural equipment, and its equivalent futures contract, heating oil, has also surged as winter approaches. The rally in oil prices combined with a much steeper increase in fuel prices has pushed inflation and government borrowing costs higher around the world and intensified fears that global economic growth might pull back without some relief. "All sectors of the economy are affected by diesel. This is one of the reasons why the government bond yields in the United States are so high, it's the expectation that inflation will continue to go up," said Claudio Galimberti, chief economist at Rystad Energy. Citing the reopening of the Strait of Hormuz taking longer than previously expected, Citi raised its average Brent crude price forecast for the third quarter to $86 a barrel from $80. ANZ analysts raised their short-term Brent crude forecast to $95 a barrel, with upside risk if the Middle East conflict intensifies.
Oil futures are up almost 60% this year, with refined products such as diesel seeing even steeper gains due to the Middle East conflict and the Russia-Ukraine war. US retail prices of the industrial fuel hit the highest since mid-2022 this week, while stockpiles in Europe are well below seasonal levels. In the US, the world's largest oil producer, crude inventories fell by 2.6 million barrels in the week ended August 28, while distillate stocks, which include diesel and heating oil, declined by 265,000 barrels, according to market sources citing data from the American Petroleum Institute, as reported by The Economic Times. West Texas Intermediate rose toward $92 a barrel and was up more than 9% for the week, with Brent settling below $96 in the previous session. On Friday, Brent crude futures settled at $92.68 a barrel, up 76 cents, or 0.8%, while West Texas Intermediate crude futures finished at $91.48 a barrel, up 18 cents, or 0.20%. Despite the hostilities in the Middle East, some crude shipments continue to exit the Persian Gulf through Hormuz, with US officials this week pointing to robust regional flows. Saudi Arabia also kept the price of its flagship crude unchanged for next month, potentially signaling that market tightness has eased. September crude oil futures were trading at ₹8681 on Multi Commodity Exchange (MCX) during the initial hour of trading on Friday against the previous close of ₹8643, up by 0.44%, with October futures trading at ₹8377 against the previous close of ₹8355, up by 0.26%.
Iraq increased its oil exports to around 2.34 million barrels per day in August from about 1.35 million bpd in July, with September exports also expected to increase as heavy discounts and Iranian approvals for Iraqi tankers encouraged buyers, according to two Iraqi energy officials as reported by The Hindu BusinessLine. Iraqi ships remain among the few vessels Tehran has cleared to pass through Hormuz, with Iraq exporting the highest amount of oil since the start of the US-Iran war in August -– a total of 2.35 million barrels a day. Of that, around 2.26 million barrels a day was exported from southern routes, which would need to eventually go through the Strait of Hormuz, as reported by The Hindu BusinessLine. Four commodity vessels transited the Strait of Hormuz on Thursday, well below the 10-day average tally of about 15, according to preliminary shipping data. Capping oil's advance, however, Russian President Vladimir Putin said there remained a path to a deal to end the war in Ukraine, adding that both the US and China were prepared to support a peace settlement, according to The Hindu BusinessLine. The war, which began with US-Israeli strikes at the end of February, is now in its seventh month, with the war, which began with US-Israeli strikes at the end of February, is now in its seventh month, as reported by The Economic Times. The war, which began with US-Israeli strikes at the end of February, is now in its seventh month, with US Vice President JD Vance telling reporters on Thursday that Washington does not plan to hold talks with Iran unless Tehran stops attacking commercial shipping in the Strait of Hormuz.
