Brent tops $85 for first time since 2024 on Mideast tensions

Brent crude prices rose to their highest level since July 2024 as the US-Israel conflict with Iran continued to escalate, disrupting supplies from the Middle East. 

At the time of writing, the Brent crude price on the Intercontinental Exchange was at $84.32 per barrel, up 8.4%.

The contract had hit $85.10 per barrel earlier in the day, its highest level since July 19. 

The price of West Texas Intermediate crude oil was at $76.64 a barrel, up 7.5%, and had hit $77.57 a barrel, its highest level since last June. 

Oil price surge and Strait of Hormuz escalation

The conflict between the US, Israel, and Iran has intensified since Israel's initial attacks on Saturday. 

Israel has now struck Lebanon, while Iran has retaliated by targeting energy infrastructure in Gulf nations and tankers in the Strait of Hormuz, a critical chokepoint for approximately one-fifth of the world's oil and liquefied natural gas shipments.

Shipping through the Strait of Hormuz has been halted, with tankers and container ships rerouting after insurers withdrew coverage and global oil and gas shipping rates surged. 

Tensions escalated further following a report by Iranian media on Monday, which cited a senior Iranian Revolutionary Guards official declaring the Strait of Hormuz closed and threatening to fire upon any vessel attempting passage.

“Depending on how sharply oil supplies decline, oil prices are likely to rise to varying degrees,” Norman Liebke, FX and commodity analyst at Commerzbank AG, said in a report. 

A sustained decline in oil supplies, estimated at just under 5%, would likely result in an oil price approaching $78, according to Liebke.

The current market price of over $80 suggests that markets are already anticipating this scenario. Should supply decrease by 10% or more, a more pronounced price increase is probable.

“If the Strait of Hormuz were completely blocked, causing supply to fall by 20%, the oil price would likely rise to over USD 100,” Liebke added. 

Regional disruptions and oil price forecasts

Meanwhile, a serious fire has been reported at Fujairah port, according to the United Arab Emirates state media on Tuesday.

This incident is the latest in a series of disruptions to the region's oil and gas infrastructure following various attacks. 

Several countries have seen production halted, either due to damage or as a precautionary measure.

Examples include Qatar stopping liquefied natural gas (LNG) production, Israel ceasing operations at some gas fields, Saudi Arabia shutting down its largest refinery, and production in Iraqi Kurdistan virtually ceasing.

Oil prices are anticipated to stay high as markets concentrate on the effects of the escalating conflict.

In light of the current situation in the Middle East, Bernstein increased its 2026 Brent oil price forecast on Monday, raising it from $65 to $80 a barrel.

The firm noted, however, that in the extreme scenario of a protracted conflict, prices could potentially surge to $120-$150.

Additionally, refined product futures are appreciating due to the threat posed to Middle East processing facilities.

For some time now, market participants have been factoring a higher risk premium into the price of oil, largely due to the ongoing US-Iran conflict.

“The fact that the US and Israel have now attacked Iran, leading to a military conflict, is driving the geopolitical risk premium even higher and pushing the oil price further away from its fundamentally “justified” price,” Commerzbank’s Liebke said. 

“If the risk premium remains unchanged, the price increase would correspond to a factor that is fundamentally justified by the decline in supply.”