Crude Oil Prices Surge 5% Amid Growing Fears of Global Supply Disruptions

Oil Prices Surge 5% as Conflict in the Middle East Disrupts Supplies

On March 5, oil prices jumped 5% as the escalating conflict between the US, Israel, and Iran disrupted supplies and shipping, leading to a reduction in output from major producers in the Middle East. Brent crude rose $4.09, or 5.02%, to $85.49 per barrel by 1:37 p.m. EST, marking a fifth consecutive session of gains. U.S. West Texas Intermediate crude increased $6, or 8.04%, to $80.66. This surge pushed U.S. crude futures to their highest level since July 2024.

The conflict has resulted in a significant reduction in oil supplies, with Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries (OPEC), cutting output by nearly 1.5 million barrels per day due to a lack of storage and export routes. Qatar, the largest liquefied natural gas producer in the Gulf, has declared force majeure on gas exports, with sources indicating that a return to normal production volumes may take at least a month.

The shutdown of the Strait of Hormuz, a critical waterway through which around a fifth of global oil flows, has had a significant impact on oil prices. Analysts at JPMorgan predict that if the Strait remains closed, crude oil supplies from Iraq and Kuwait could start shutting within days, potentially cutting 3.3 million barrels per day by day eight of the conflict.

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The conflict has also led to attacks on oil tankers, with the Bahamas-flagged crude oil tanker Sonangol Namibe reporting a breach in its hull after a blast near Iraq's port of Khor al Zubair. This, combined with measures by China to reduce fuel exports, has pushed prices higher, according to UBS analyst Giovanni Staunovo. The refined product market is also experiencing stress due to missing Middle East exports.

As a result of the lower supply outlook in fuel markets, U.S. diesel futures jumped 10%, reaching just over $3.60 a gallon during the session. Around 300 oil tankers remain inside the Strait of Hormuz, with vessel traffic in and out of the chokepoint nearly halted following the outbreak of war.