Brent crude futures crossed $100 a barrel for the first time since July 24 amid escalating attacks in the Middle East. This brought futures prices in line with physical crude and fuel markets, where prices have already been trading above that threshold.
Front-month Brent crude futures were up $2.74, or 2.8%, at $100.66 a barrel by 1315 GMT, after earlier touching $100.95. U.S. West Texas Intermediate crude was up $2.74, or 3%, at $95.77 a barrel, its highest level since early June.
Brent crude had surged as high as $126.41 since the start of the Iran war on Feb. 24, reaching that peak on April 30.
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“The move towards and back above $100 Brent is reflecting a market that increasingly has to change its view on how long the Middle East crisis will continue to curb supply from the region,” said Ole Hansen, head of commodity strategy at Saxo Bank.
In the latest escalation, U.S. forces hit multiple Iranian oil tankers, while Iran targeted a U.S. base in Jordan and attacked ships. A seafarer was killed in an incident involving the Gibraltar-flagged oil products tanker Hercules Star while it was at anchor off Dubai, according to the vessel’s charterer, Peninsula.
There have also been attacks by Iran-backed Houthis on Saudi energy facilities, threatening an expansion of the conflict. The attacks threaten crude shipments through the Red Sea, which has served as a key alternative route to the Strait of Hormuz, a crucial oil transit route that has been disrupted since the war began.
“Market participants appear to be pricing in a more prolonged conflict in the Middle East as well as the risk that the latest escalation in military strikes disrupts oil flows from the Middle East,” said Hamad Hussain, senior climate and commodities economist at Capital Economics.
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“The key risk is whether the recent attacks on oil tankers lead to fewer ship-to-ship transfers taking place in the Gulf of Oman, which have so far played a key role in providing oil to global markets and keeping a lid on prices.”
In the physical crude oil market, the dated Brent oil benchmark, against which roughly two-thirds of global crude supplies are priced, has been above $100 a barrel since Sept. 3, according to LSEG data.
Meanwhile, consumers have been paying more than $100 a barrel for oil in the form of refined fuels such as gasoline and diesel for most of this year, as conflicts have created a global refining crunch that has pushed fuel prices higher, even relative to crude.