Oil prices jumped on Thursday due to new U.S. strikes in Iran, raising worries about shipping disruptions in the Strait of Hormuz. Brent crude rose 1.81% to reach $96 per barrel, while West Texas Intermediate saw an increase of 1.86%, hitting $90.33.
American forces targeted a military site in Iran that posed a threat to U.S. troops and shipping lanes. They also intercepted several Iranian drones during this operation. This news adds to ongoing concerns over oil supply stability.
In a recent note, Citi highlighted that oil markets are stabilizing. Investors are starting to believe the worst-case scenarios for supply disruptions may not happen. This optimism comes amid signs that the U.S. and Iran could be moving toward an agreement.
However, Citi also warned that uncertainty about the timing of any deal could cause central banks to remain cautious. Rising oil prices are contributing to broader inflation concerns, with many central banks shifting to a stricter monetary policy in response to these energy-driven inflation risks.
Interestingly, earlier this year, oil prices spiked significantly after Russia invaded Ukraine, demonstrating how geopolitical tensions can lead to market volatility. Today, similar patterns are emerging with escalating tensions in the Middle East.
Furthermore, according to a recent survey by the International Energy Agency (IEA), global oil demand is expected to rise by 2.2 million barrels per day in 2023, with Asia leading the charge. This surge in demand will put additional pressure on supply stability, making geopolitical developments even more critical.
For those interested in deepening their understanding, you can find more insights in this report by the IEA.
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