Oil prices jump over 3% as widening Iran conflict raises supply concerns

Oil prices climbed more than 3% on Thursday, extending their rally as the escalating conflict involving the United States, Israel, and Iran disrupted energy supplies and shipping routes. The tensions prompted some major producers to reduce output while others took steps to secure supply. Brent crude rose $2.64, or 3.2%, to $84.04 per barrel by 1425 GMT, marking a fifth straight session of gains, while U.S. West Texas Intermediate (WTI) increased $3.35, or 4.5%, to $78.01.

The premium of prompt Brent futures over the six-month contract approached its widest level since July 2022, signaling tighter global supply. Renewed tanker attacks in the Gulf and China’s move to curb fuel exports also supported prices, according to UBS analyst Giovanni Staunovo, who noted that refined fuel markets are showing stress due to reduced Middle East exports. Some refineries in the Middle East, China, and India have shut crude units amid the conflict, while European diesel futures surged to their highest level since October 2022 at $1,130 per tonne.

Attacks on oil tankers continued in the Gulf, including damage to the Bahamas-flagged tanker Sonangol Namibe near Iraq’s Khor al Zubair port. Around 300 tankers remained stranded in the Strait of Hormuz as traffic through the vital chokepoint nearly halted. Natural gas prices also rose after Russian President Vladimir Putin warned that Russia could stop its remaining gas flows to Europe, while Qatar declared force majeure on LNG shipments. European gas prices at the Dutch TTF hub for April delivery climbed nearly 3% to around 50 euros per MWh, bringing gains since Friday to nearly 60%.

Meanwhile, Iran launched missiles at Israel as the conflict entered its sixth day, following a U.S. submarine strike that sank an Iranian warship near Sri Lanka. Analysts at J.P. Morgan warned that oil supplies from Iraq and Kuwait could begin shutting down if the Strait of Hormuz remains closed, potentially removing up to 3.3 million barrels per day from the market. Iraq has already reduced production by nearly 1.5 million barrels per day due to limited storage and export routes, while Qatar said it may take at least a month to restore normal LNG export levels.

Sources: Enes Tunagur