WTI surges on geopolitical tension amid supply disruptions concerns

Middle East geopolitical concerns have caused a more than 2% increase in WTI crude oil prices. Attacks on ships by a militant organisation associated with Iran that disrupt oil shipping routes across the Red Sea serve as the impetus for the rally.

The price of WTI is supported by geopolitical worries and the depreciation of the US dollar. The US Federal Reserve finished its tightening cycle and hinted at rate reduction in 2024, which helped to extend the advance in crude oil prices to four days in a row.

Oil prices are already being impacted, though, by an attack on ships owned by Norwegians and companies that ship oil around the Red Sea. An important factor in oil’s comeback is the increase in the geopolitical risk premium, which includes recurrent skirmishes in the Red Sea between Iran-backed Houthi rebels and commercial vessels. Approximately 15% of global maritime traffic traverses the Suez Canal.

WTI’s surge was mitigated by an increase in supply, but the crude oil output curbs extended by Saudi Arabia and Russia to the first quarter of 2024 are what’s driving higher oil prices. The future of WTI is still unclear, but more tension in the Middle East might drive up prices and slow the rate of global inflation.