Global oil prices continued their significant rise for the third consecutive day, posting gains of 1.5% on Thursday. This increase is driven by growing investor concerns in energy markets about the potential for a military confrontation between the United States and Iran, which threatens to disrupt vital oil supplies from the Middle East.
In trading details, Brent crude futures, the global benchmark, rose 94 cents, or 1.4%, to settle at $69.34 a barrel by 07:30 GMT. West Texas Intermediate (WTI) crude, the US benchmark, also saw a similar increase, rising 92 cents, or 1.5%, to $64.13 a barrel, reflecting the prevailing cautious sentiment in the markets.
Background of tensions and their impact on markets
This escalation stems from the “maximum pressure” policy pursued by the Trump administration against Tehran, aimed at forcing it to renegotiate its nuclear program and regional influence. This policy included the US withdrawal from the 2018 nuclear agreement and the reimposition of crippling economic sanctions, along with repeated threats of military strikes. More recently, these threats have been reinforced by the deployment of US naval assets, including an aircraft carrier and a bomber task force, to the region to deter what Washington describes as “Iranian threats.”.
The region's importance to global energy supplies
These tensions are particularly significant given the pivotal role the Gulf region plays in the stability of global energy markets. The Strait of Hormuz, bordered by Iran, is the world's most important waterway for oil shipments, with nearly one-fifth of global consumption passing through it. Any disruption to shipping through this strait, whether resulting from direct military action or escalating tensions, could trigger a supply shock, driving prices to record highs and negatively impacting the global economy, especially oil-importing nations.
Analysis and future projections
Analysts are closely monitoring developments in the crisis, and markets have already begun pricing in a “geopolitical risk premium.” In this context, analysts at Citigroup noted in a recent memo that the possibility of an attack on Iran has already added between $3 and $4 per barrel to the risk premium. They predicted that in the event of any further escalation, Brent crude prices could reach $72 per barrel within the next three months. Markets remain on high alert, as the price trajectory hinges on the next steps taken by both Washington and Tehran.
