Brent jumps above $100 a barrel as Middle East conflict escalates

Oil prices rose on Wednesday, with Brent crude breaking above $100 a barrel to reach a six-week high as the conflict in the Middle East escalated and concerns over oil flows intensified, catching up with physical crude and fuel prices that had already surpassed the psychological threshold.

In trading, Brent crude futures rose $2.77, or 2.83%, to $100.69 a barrel by 12:26 GMT, after touching $100.95 earlier in the session. US West Texas Intermediate crude climbed $2.18, or 2.34%, to $95.21 a barrel, its highest level since early June.

Since the outbreak of the Iran war on February 28, Brent has climbed as high as $126.41 a barrel, a level last reached on April 30.

Houthis escalate attacks against Saudi Arabia

Iran-backed Houthis launched attacks on energy facilities in Saudi Arabia this week, sparking fires at oil installations and threatening to significantly widen the conflict.

The attacks also threaten crude shipments through the Red Sea, which had served as a key alternative route to the vital Strait of Hormuz, where oil flows have fallen sharply.

In a major escalation of the six-month war, US forces targeted several Iranian oil tankers, while Iran struck a US base in Jordan and attacked vessels.

Supply risks intensify

Banks including Goldman Sachs, Bank of America and HSBC have raised their crude oil price forecasts in recent days.

In the week before fighting resumed on August 30, oil flows through the Strait of Hormuz ranged between around 8 million and 9 million barrels per day, twice the volume recorded in the previous week, according to Claudio Galimberti, chief economist at Rystad Energy. Flows have recently fallen to below 2 million barrels per day.

In the physical oil market, the Dated Brent benchmark, which is used to price around two-thirds of global crude supplies, has traded above $100 a barrel since September 3, according to LSEG data.

Physical oil markets react quickly to supply disruptions, as buyers are forced into the market to secure alternative cargoes.

Meanwhile, consumers have been paying more than $100 a barrel for oil in the form of refined fuels such as gasoline and diesel for much of this year, after conflicts triggered a global refining capacity crisis that pushed fuel prices sharply higher even relative to crude.

European diesel futures were trading at around $199 a barrel on Wednesday and have not fallen below $100 a barrel since the start of the Iran war.

European gasoline has also traded above $100 a barrel since March, while its premium over crude approached record levels of more than $60 a barrel at the beginning of the month.

In the United States, consumers faced record gasoline prices over the Labor Day holiday, while diesel prices reached all-time highs last week as persistent supply concerns continued to tighten fuel markets.