Oil Prices Reach 19-Month High Amid Tensions with Iran

Global Oil Markets

Key Developments:

• Crude oil benchmarks rose approximately 7% on Tuesday, marking a third consecutive session of gains, as the US-Israeli conflict with Iran widens, disrupting fuel shipments and heightening fears of further disruption to Middle East oil and gas supply.
• Brent crude futures increased by $5.70, or 7%, to $83.44 per barrel by 1326 GMT, reaching its highest level since July 2024 at $85.12.
• US West Texas Intermediate crude gained $5.03, or 7%, to $76.26 after hitting its highest level since June at $77.58.

Market Impact:

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• The two contracts have risen as much as 17% and 16%, respectively, since Friday's close, before the attacks started.
• Tankers and container ships are avoiding the Strait of Hormuz, a critical waterway through which a fifth of the world's oil and liquefied natural gas typically passes, after insurers cancelled coverage for vessels and global oil and gas shipping rates soared.
• Concerns increased after Iranian media reported that a senior Iranian Revolutionary Guards official stated the Strait of Hormuz is closed, warning that Iran will fire on any ship trying to pass.

Regional Developments:

• United Arab Emirates authorities are dealing with a serious fire at Fujairah port.
• Iraq's Kirkuk crude oil loadings at Turkey's Ceyhan port stopped on Tuesday.
• Several countries have shut down oil and gas infrastructure due to damage or as a precautionary measure, including Qatar, Israel, Saudi Arabia, and Iraqi Kurdistan.

Gas Markets:

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• Benchmark Dutch contracts, British gas prices, and European and Asian LNG prices all jumped.
• Analysts expect oil prices to remain elevated over the coming days while markets focus on the impact of the escalating conflict.

Price Projections:

• Bernstein raised its 2026 Brent oil price assumption to $80 per barrel from $65 but said that prices could reach $120-$150 in an extreme case of prolonged conflict.
• Refined product futures are also gaining due to the risk of damage to Middle East processing facilities.
• US ultra-low-sulfur diesel futures were up 15% at $3.32 per gallon, while gasoline futures were up 6% at $2.50 per gallon.
• European gasoil futures gained 16% to $1,025 per metric ton.