WTI tops $100 as US-Iran conflict fuels supply fears

WTI crude oil prices climbed above $100 a barrel on Thursday for the first time since May 19, while Brent crude extended its rally as the escalating US-Iran conflict raised concerns about further disruptions to global energy supplies.

WTI crude rose 4.3% to trade above $100, while Brent crude gained 4% to $105.28.

Brent has risen nearly 30% from its early August lows as efforts to reach a permanent ceasefire between the US and Iran failed and fighting resumed later in the month.

US-Iran conflict raises supply concerns

Oil prices have extended their gains after Iran and the US launched their largest attacks on shipping since the six-month-old conflict began.

Iran said it attacked 10 ships near the Strait of Hormuz on Wednesday after the US sank five Iranian oil tankers.

The Islamic Revolutionary Guard Corps said it would escalate its response to further attacks, adding to concerns about disruptions along a key route for Middle Eastern energy exports.

The Strait of Hormuz carried roughly a fifth of global oil and gas supplies before the war, but flows remain far below pre-war levels.

US President Donald Trump also warned that the US could strike Iran's Pickaxe Mountain and said the conflict would likely continue beyond the November midterm elections.

The comments have added to expectations that geopolitical tensions could continue supporting oil prices in the near term.

Red Sea tensions add to oil market risks

Supply concerns are also spreading to the Red Sea, where Iran-aligned Houthi militants have increased attacks against Saudi Arabia.

Three sources told Reuters that the Houthis had taken control of the Yemeni Red Sea city of Mocha.

Attacks by Houthi militants on several Saudi energy facilities have already prompted temporary suspensions of some operations, adding another source of uncertainty for global oil markets.

The physical crude market has also remained strong.

Dated Brent, a benchmark against which roughly two-thirds of global oil supplies are priced, has traded above $100 since September 3, according to LSEG data.

Analysts said the sustainability of Brent's rally could depend partly on demand from China, the world's largest crude importer.

China demand and US inventories in focus

China has increased crude purchases in recent weeks following months of subdued demand, supporting physical crude markets, according to ING analysts.

Continued buying could amplify the impact of supply disruptions and push prices higher, while weaker imports could limit the rally.

"For months the bearish case rested on soft Chinese demand as a reliable dampener. That dampener was never structural. It was a drawdown, a buffer being spent, and buffers empty," said David Jorbenaze, global oil market lead at ICIS said in a Reuters report.

US inventory data will also be closely watched. The American Petroleum Institute said crude inventories fell by 300,000 barrels in the week ended September 4, below expectations for a 1.3 million-barrel decline and the previous week's 2.6 million-barrel draw.