Oil prices jumped sharply after fresh US military strikes on an Iranian military base in Bandar Abbas, raising fresh fears of energy supply disruption in the strategic Strait of Hormuz and a resurgence of Middle East fears.
International benchmark Brent crude rose nearly 3.75 percent to about $97.83 a barrel, and West Texas Intermediate (WTI) crude for the United States surged about 4 percent to about $92.22 a barrel following the attacks. The sharp rise was a sign of increasing investor worries around instability in one of the world’s most vital oil trade zones.
Bandar Abbas is on the southern coast of Iran and near the Strait of Hormuz, a narrow shipping passage that is extremely crucial and routes close to one-fifth of the world’s oil and liquified natural gas (LNG) outflows. Disruptions in the passage through the strait may have major repercussions on global energy markets and on fuel prices all over the world.
The oil price spike followed a plunge in markets earlier this week in the wake of optimism that diplomatic efforts would help to reopen and stabilize the Strait of Hormuz. However, traders had hoped that tensions in the area would be alleviated after reports of potential backchannel talks with international powers.
But the new U.S. hits have further triggered concerns over a potential long war with Iran and repercussions to global energy supply lines.
If the tensions persist, crude oil prices can go higher and add to the pressure on fuel prices, inflation, and the world economy, analysts said.