Middle East Conflict Tensions Propel Brent Crude to $93 per Barrel

Both benchmarks had earlier reached their highest levels in two weeks, gaining more than $3.

Global oil benchmark Brent surged to $93 per barrel on Wednesday due to heightened concerns about escalating conflict in the Middle East, which threatened to disrupt oil supplies from the region.

The increase in oil prices was further fueled by Iran’s call for an oil embargo on Israel.

Brent crude futures rose by $2.54 or 2.8% to reach $92.44 per barrel at 1056 GMT, while West Texas Intermediate crude (WTI) futures also climbed by $2.54 or 2.9%, reaching $89.2 per barrel.

Both benchmarks had earlier reached their highest levels in two weeks, gaining more than $3.

The market reacted with risk premiums as a result of a tragic incident on Tuesday, where a blast at a Gaza City hospital resulted in the deaths of hundreds of Palestinians.

Israeli and Palestinian officials attributed blame to each other for the incident. Subsequently, Jordan canceled a summit that was set to be held with U.S. President Joe Biden, along with Egyptian and Palestinian leaders.

President Biden, who arrived in Israel on Wednesday, expressed support for Israel’s stance that the Gaza hospital explosion was caused by militants, further adding to the tensions.

The increase in oil prices was also driven by Iranian Foreign Minister Hossein Amirabdollahian’s call for the Organization of Islamic Cooperation to impose an oil embargo on Israel.

However, OPEC+ has not indicated any immediate plans to act upon Iran’s request.

Analysts noted that the prospect of a prolonged occupation in the region could push Brent oil futures above $100 per barrel, as it raises the risk of further escalation in the Israel-Hamas conflict and potential involvement by Iran.

Apart from geopolitical tensions, other factors were supporting oil prices. U.S. crude stocks fell by a significantly larger-than-expected 4.4 million barrels in the week ending on October 13, compared to the forecasted 300,000 barrel decrease. Official U.S. government data was expected later on Wednesday.

On the demand side, China’s economy exceeded expectations by growing faster in the third quarter, suggesting that recent policy measures were aiding its tentative recovery.

Data also revealed that China’s oil refinery throughput in September reached a record daily rate, increasing by 12% compared to the previous year.

This increase was attributed to strong demand for transport fuel during the Golden Week holiday and improved manufacturing activity.

However, analysts remained cautious about China’s economy due to ongoing challenges in the real estate sector.

Additionally, higher-than-expected U.S. retail sales in September raised expectations of another interest rate hike by the end of the year, which could potentially slow economic growth and reduce oil demand.