Global energy prices surged as concerns over the escalation of conflict between the US and Iran continued to rise. On Thursday, Brent crude oil prices broke through $120 per barrel, marking a new four-year high.
According to reports from Reuters, as of 06:59 GMT, Brent crude futures rose by $4.28, or 3.63%, to $122.31 per barrel, reaching a high of $126.41 during the session, the highest level since March 9, 2022. The front-month contract (June contract), which saw its ninth consecutive trading day of gains, is set to expire today. The more active July contract traded at $112.49 per barrel, up $2.05, or 1.86%.
US West Texas Intermediate (WTI) crude futures rose by $1.46, or 1.37%, to $108.34 per barrel, hitting a new high since April 7, following a 7% increase in the previous trading day.
Brent crude has risen by over 100% so far this year, while WTI crude has increased by around 90%.
Both benchmark oil prices are expected to record their fourth consecutive month of gains, reflecting market concerns that the escalation of conflict in Iran could lead to disruptions in oil supplies from the Middle East, potentially impacting global economic growth and raising inflation risks.
According to Axios, on Wednesday (29th), US President Trump is expected to receive a briefing on a new round of military strikes against Iran. The US is planning to use military means to force Iran to return to nuclear program negotiations.
Following the joint US-Israeli airstrikes on Iran on February 28, Iran closed the Strait of Hormuz. Despite a ceasefire agreement reached between the US and Iran earlier this month, Iran has not lifted the blockade on this crucial international waterway, while the US has imposed a blockade on all Iranian ports since April 13.
Currently, peace talks between the US and Iran are at a standstill. Analyst Tony Sycamore from IG Markets pointed out in a report, “The prospects for a resolution of the conflict in Iran or the reopening of the Strait of Hormuz in the short term remain slim.”
White House officials stated that Trump convened a meeting with executives from US oil companies on Wednesday (29th) to discuss how to mitigate the impact of a potential months-long blockade at sea.
Kelvin Wong, a senior market analyst at OANDA, said, “Market participants are closely monitoring the dynamic developments of the US-Iran conflict in the short term and the risks of a long-term blockade of the Strait of Hormuz.”
He further added that the progress of the US-Iran conflict is of great concern for the market, with implications extending beyond the impact of the Organization of the Petroleum Exporting Countries (OPEC) and the weakened influence of OPEC+ after the withdrawal of the United Arab Emirates.
Sources revealed to Reuters on Wednesday that the OPEC+ alliance, consisting of OPEC and its allies, is likely to agree on a slight increase of around 188,000 barrels per day in crude oil production quotas this Sunday.
This meeting comes after the UAE’s exit from OPEC, a decision that will take effect on May 1. The UAE’s departure is expected to directly impact the ability of this oil-producing country group to control oil prices.
Despite the UAE’s increased oil production after its exit, analysts believe that this is unlikely to affect the market fundamentals for the rest of this year, especially considering the blockade in the Strait of Hormuz and disruptions in oil production and supply caused by the conflict.
Analysts suggest that demand contraction could be a factor in alleviating the current tight supply situation. ING analysts estimate that due to high oil prices leading to consumers and end-users ceasing the use of certain oil products, daily demand could decrease by around 1.6 million barrels.
While this is a significant figure, analysts noted in a report that it “clearly is not enough to fill the supply gap we are currently facing.”