Brent rises above $80/bbl as Middle East crisis escalates
The front-month ICE Brent contract has risen by $2.05/bbl on the day, to trade at $81.14/bbl at 09.00 GMT.
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Upward pressure:
Oil prices have risen for a second straight session as the expanding US–Israeli confrontation with Iran and mounting threats to shipping through the Strait of Hormuz have intensified concerns over potential supply disruptions from the Middle East.
On Monday, the US and Israeli air campaign against Iran broadened, with Israel striking targets in Lebanon and Iran retaliating with attacks on energy infrastructure in Gulf states and on tankers operating in the Strait of Hormuz. Both tankers and container vessels are steering clear of the passage after insurers withdrew coverage for ships transiting the corridor, according to Reuters.
“Crude oil prices surged as the war in the Middle East led to immediate disruptions to oil supplies… Traffic through the Strait of Hormuz has come to a halt as insurance firms revoke policies on vessels transiting the waterway,” said Daniel Hynes, senior commodity strategist at ANZ Bank.
“While there are concerns about oil flows through the Strait of Hormuz, a greater risk to the market would be Iran targeting additional energy infrastructure in the region. This could lead to more prolonged outages,” two analysts from ING Bank added.
Downward pressure:
Brent crude is not facing any notable downside pressure today, but traders are watching closely for the upcoming US crude inventory report.
Last week, the US Energy Information Administration (EIA) recorded a sharp build of 16 million bbls in US crude stocks.
An increase in inventories typically signals softer demand, which can weigh on Brent futures.
Meanwhile, eight members of OPEC+ have agreed to raise collective oil production by 206,000 b/d in April.
The planned output hike could add further downward pressure on Brent, as it heightens concerns about a possible oversupply in the market.
By Tuhin Roy
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