Oil prices rose on Thursday amid concerns that escalating Middle East tensions could disrupt crude supplies, though strong global supply capped gains. Brent crude hit $75.31, with fears growing over potential Israeli strikes on Iran. Rising U.S. inventories suggest the market remains well supplied.
Oil prices rose on Thursday as investor concerns grew over the potential for an escalating Middle East conflict to disrupt crude supplies from the region, though a stronger global supply outlook kept a lid on gains.
Brent crude futures climbed by $1.41, or 1.91%, to reach $75.31 per barrel by 1050 GMT, while U.S. West Texas Intermediate (WTI) crude futures increased by $1.45, or 2.07%, to $71.55. Market anxieties are intensifying over the possibility of Israel targeting Iranian oil infrastructure, which could prompt retaliatory actions from Iran.
Analyst Ashley Kelty from Panmure Gordon warned that escalating tensions could lead Iran to block the crucial Strait of Hormuz or target Saudi infrastructure, as it did in 2019. The strait handles around a fifth of global daily oil supply. On Thursday, Israel bombed Beirut, killing at least six people, following its deadliest day of clashes with Iran-backed Hezbollah on the Lebanese front.
Israeli Prime Minister Benjamin Netanyahu warned that Iran would face consequences for its missile attack on Israel on Tuesday, while Tehran responded, vowing that any retaliation would result in "vast destruction," heightening concerns of a broader conflict.
"From here, it's a waiting game to see what the Israeli response will be and I suspect that comes after the conclusion of the Rosh Hashanah holiday tomorrow," said IG market analyst Tony Sycamore, referring to the Jewish New Year.
Meanwhile, U.S. crude stockpiles increased by 3.9 million barrels to 417 million in the week ending September 27, according to the Energy Information Administration. This rise contrasts with a Reuters poll, which had predicted a 1.3 million barrel decline.
ANZ analysts told in a note that rising U.S. inventories further indicate the market is well supplied and capable of handling potential disruptions. Concerns have been eased by OPEC's production capacity and the fact that global crude supplies remain unaffected by unrest in the key oil-producing region. OPEC also has sufficient spare capacity to offset a complete loss of Iranian supply if Israel were to target the country's facilities.
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