Oil prices climbed for a third straight day on Wednesday as renewed tensions in the Middle East heightened fears over potential disruptions to global energy supplies, particularly around the strategically important Strait of Hormuz.
Brent crude rose 1% to US$94.74 a barrel after reports that Iranian missile attacks targeting several Gulf states had either failed or been intercepted by US forces. The latest developments came as efforts to secure a lasting peace agreement between the US and Iran appeared to lose momentum.
Market participants are increasingly concerned that any prolonged conflict could threaten shipping routes through the Strait of Hormuz, a vital artery for global oil exports. The waterway handles roughly a fifth of the world’s oil supply, making it highly sensitive to geopolitical instability.
The oil rally has also reignited concerns over inflation, with higher energy costs expected to feed through to transportation, manufacturing and consumer prices worldwide. Investors are now reassessing expectations for interest rates as central banks may be forced to keep monetary policy tighter for longer if energy-driven inflation persists.
Analysts noted that markets had previously priced in a de-escalation following signs of progress in US-Iran negotiations. However, renewed military activity has prompted traders to reverse some of those bets, supporting further gains in crude prices.
The surge in oil comes as global economies are already grappling with elevated costs linked to the ongoing Middle East conflict. Japan this week approved an additional budget worth US$19 billion to help households cope with rising fuel and utility prices, underscoring the broader economic impact of higher energy costs.
Investors will continue monitoring developments in the Gulf closely, with any disruption to oil flows through the Strait of Hormuz likely to trigger further volatility in energy markets and place additional pressure on inflation globally.
