Brent skyrockets amid Middle Eastern flare up

The front-month ICE Brent contract has surged by $7.91/bbl on the day from Friday, to trade at $79.09/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

Brent crude’s price has risen by almost $8/bbl after US and Israeli forces launched a joint military attack on Iran, reportedly killing the Islamic Republic’s Supreme Leader Ayatollah Ali Khamenei.

Iran did not take long before launching a multitude of strikes, targeting US military bases as well as residential areas across several countries in the Middle East.

The move was largely expected by oil market analysts, as representatives from both sides failed to reach a breakthrough in earlier rounds of indirect nuclear talks in Geneva.

“The breakdown of talks leading to an escalation of the conflict has the biggest implications for the oil market,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

OPEC’s de-facto leader Saudi Arabia's state oil company Aramco halted its Ras Tanura refinery after it was hit by a drone earlier today, Reuters reported.

Meanwhile, Israel has launched fresh air strikes targeting Iran-backed Hezbollah militants in Lebanon – escalating tensions on the third day of cross-border strikes.

All eyes will likely remain on any new developments in the Strait of Hormuz, according to market analysts.

“With the retaliatory action now evolving to attacks on oil tankers in the Strait of Hormuz, the threat on oil supplies has substantially risen,” Hynes added.

Downward pressure:

While there are no significant downward pressures on Brent’s price today, market participants await the next US crude stocks report.

Last week, the US Energy Information Administration (EIA) reported a massive 16 million bbls increase in US crude stocks.

A rise in US crude stocks can indicate slow demand for oil and drag Brent's price lower.

Besides, eight members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have collectively agreed to increase oil output by 206,000 b/d in April.

The move could exert downward pressure on Brent, by fueling concerns over a potential supply glut.

By Aparupa Mazumder

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