LONDON/NEW YORK – Global oil prices jumped more than 1% on Thursday, pushed higher by escalating tensions in the Middle East after Israel vowed to intensify its attacks on Iran following a deadly missile strike on a hospital in southern Israel.
The international benchmark, Brent crude, rose by $0.90, or 1.17%, to trade at $77.60 a barrel by late afternoon trading. West Texas Intermediate (WTI), the U.S. benchmark, saw a similar increase, climbing $1.16, or 1.54%, to $76.30 per barrel.
The latest surge in the ongoing conflict saw an Iranian missile slam into a major hospital in southern Israel, causing multiple casualties and significant damage. The act drew swift condemnation from Israeli Prime Minister Benjamin Netanyahu, who promised a forceful response. In a public statement, Israel’s Minister of Defense, Israel Katz, accused Iran of “war crimes of the most serious kind” and declared that he and the Prime Minister had instructed the Israeli military “to increase the intensity of the attacks against strategic targets in Iran.”
This direct threat of retaliation from a key military power in the region has sent jitters through the oil markets, which are acutely sensitive to any potential disruption in Middle Eastern supply.
“The market is reacting to the clear and present danger of a wider conflict,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. “Every rocket fired and every threat issued adds a risk premium to the price of oil.”
The primary concern for the market is the potential for the conflict to impact critical oil shipping lanes, particularly the Strait of Hormuz. The narrow waterway, located off the coast of Iran, is a chokepoint for approximately 20% of the world’s daily oil consumption. Any disruption or closure of the strait could lead to a significant tightening of global supply and send prices soaring.
“While global oil supply is sufficient to withstand a disruption to Iranian exports, the greater concern is the potential impact on oil shipments through that waterway,” commented one industry expert. Analysts have warned that a direct conflict could push prices toward $100 a barrel, a level not seen in months.
The heightened geopolitical risk premium is currently overshadowing other market fundamentals. Concerns about a potential global economic slowdown and its impact on demand have taken a backseat to the immediate threat of supply disruptions.
As the conflict enters its seventh day, which has seen Israel carry out a series of airstrikes on Iranian targets, including nuclear-related facilities, and Iran retaliating with hundreds of missiles and drones, the trajectory of oil prices remains firmly tied to the volatile situation on the ground. Traders and investors are now closely watching for any signs of further escalation or potential de-escalation, with the former likely to add further upward pressure on crude prices.
