Oil prices surged to six-week highs on Wednesday, with Brent crude topping 98 dollars a barrel, after the fragile US-Iran ceasefire that had briefly halted hostilities collapsed over the weekend, reigniting fears of supply disruptions from the worlds most important oil transit chokepoint.
Brent crude futures rose more than 5 percent in volatile trading, while US West Texas Intermediate crude climbed above 94 dollars. The rally erased most of the declines seen when the ceasefire was announced just days earlier, underscoring how quickly geopolitical risk has returned to energy markets.
President Donald Trump declared the ceasefire over over the weekend, accusing Iran of violating its terms by continuing to target US assets in the region. Irans foreign ministry rejected the accusation and accused Washington of bad faith, setting the stage for a renewed escalation that traders had hoped to avoid.
The Strait of Hormuz, through which roughly 20 percent of the worlds oil passes, remains the central risk. Iran has previously threatened to disrupt shipping through the narrow waterway, and US naval forces have reinforced their presence in the Persian Gulf. Any disruption to tanker traffic would have immediate and severe consequences for global crude supplies.
“The market had priced in a sustained de-escalation, and that thesis has now been invalidated,” said a senior commodities analyst at a London-based trading house. “We are back to pricing in a significant supply risk premium, and the question now is how high oil can go before demand destruction kicks in.”
The price surge is feeding directly into gasoline costs for consumers. US retail gasoline prices rose for the first time since May, with the national average climbing several cents over the past week, according to AAA. European motorists are also facing higher prices at the pump.
The oil rally adds a new layer of complexity for central banks. The ECB cited energy price risks in its decision to keep a September rate hike in play, and the Federal Reserve faces similar pressure as higher fuel costs threaten to keep inflation elevated.
OPEC+ producers have spare capacity that could theoretically be deployed to calm markets, but the cartel has been cautious about increasing output, mindful of the uncertain demand outlook. Saudi Arabia and the UAE have the most spare capacity, but any decision to open the taps would require political consensus within the group.
Shipping insurers have raised premiums for vessels transiting the Persian Gulf and Gulf of Oman, adding to the cost of delivering crude to international markets. Several shipping companies have reportedly begun rerouting vessels away from the region, extending voyage times and tightening available supply.
Analysts warn that oil could test the 105 to 110 dollar range if the conflict intensifies further or if any actual disruption to Strait of Hormuz traffic materializes. The situation remains fluid, with diplomatic channels reportedly still open despite the ceasefire collapse.
— Pulse Of Nations Wire Desk
Author: Pulse Of Nations Wire Desk
