Brent crude oil prices surged 3.8 percent on Tuesday to reach $97.26 a barrel after Iran launched a barrage of ballistic missiles at a US military base in Jordan, shattering a brief pause in the escalating conflict between Washington and Tehran.
The US military confirmed it had intercepted multiple Iranian missiles and, in coordination with Saudi Arabia, struck sites in Iraq used by Tehran-backed militias. Washington described the Iranian action as an attempted surprise attack.
The fresh escalation sent shockwaves through global energy markets, which had begun to price in the possibility of de-escalation after weeks of intense fighting. The rally erased recent declines and pushed oil back toward levels that have forced central banks around the world to reconsider their inflation and interest rate outlooks.
Analysts at ING warned that the attack threw cold water on expectations of a swift resolution in the Persian Gulf. With Saudi oil infrastructure increasingly targeted, the risk of more prolonged supply disruptions grows, they wrote in a note to clients. Reports indicate that the 400,000 barrel-per-day Jazan refinery in Saudi Arabia has shut following Houthi attacks over the weekend, adding to tightness in refined product markets already dealing with disruptions from the Gulf and Russia.
Tanker traffic through the Strait of Hormuz, the world’s most important oil chokepoint, remains effectively halted. Iran has rejected Oman’s proposal for a shared shipping management plan, insisting instead on overseeing both inbound and outbound vessel movements through the strategic waterway. Roughly 20 percent of global oil supply transits the Strait daily.
The oil price jump rippled through equity markets. European stock indices opened mixed, with the FTSE 100 gaining 0.6 percent on strength in basic materials and energy stocks, while the Stoxx Europe 600 edged up 0.3 percent. However, chip stocks continued their sell-off in Asia, with South Korea’s KOSPI losing 8.3 percent as semiconductor heavyweight SK Hynix slumped 9 percent despite reporting a six-fold surge in quarterly profit.
Commodity prices more broadly have been lifted by the conflict. Copper prices have risen on AI-driven demand for data center construction materials, boosting miners such as Rio Tinto, which reported a 43 percent jump in first-half underlying profit to $6.7 billion, driven by surging copper earnings.
The oil shock comes at a delicate moment for the global economy. Central banks are grappling with sticky inflation that has been exacerbated by rising energy costs. The US Federal Reserve, which began its July policy meeting this week, faces a particularly difficult decision as it weighs the inflationary impact of higher oil prices against signs of slowing economic growth.
Consumer goods group Reckitt Benckiser, which warned in April of a possible 150 million pound hit from rising oil prices, said Tuesday that it now expects a reduced impact as prices have moderated from their peaks, but cautioned that the outlook remains volatile.
Market participants are now watching for any signs of further escalation that could push oil prices above $90 a barrel, a level that economists say would significantly increase the risk of a global recession.