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Oil prices spiked on Wednesday, with Brent crude rising by 1.36% to $74.56 per barrel and U.S. West Texas Intermediate (WTI) jumping 1.53% to $70.90, driven by escalating concerns over possible crude supply disruptions following Iran’s largest military strike against Israel. This follows Tuesday’s significant surge, where both benchmarks gained over 5%.
Key Drivers of the Surge:
- Iran-Israel Tensions: Iran launched a ballistic missile attack on Israel, prompting fears of a potential wider conflict in the Middle East. Tehran warned of “vast destruction” if Israel retaliates, raising concerns about possible disruptions to the region’s oil supply.
- UN and EU Reactions: The UN Security Council is scheduled to address the Middle East situation, while the European Union has called for an immediate ceasefire.
Implications for Oil Supply:
- Iran’s Role: As an OPEC member, Iran’s direct involvement in the conflict raises the risk of supply disruptions. The country’s oil output recently reached a six-year high of 3.7 million barrels per day in August.
- OPEC+ Meeting: OPEC+ ministers are meeting later today to review market conditions, though no immediate policy changes are expected. The alliance plans to increase output by 180,000 barrels per day from December.
Analyst Insights:
- Priyanka Sachdeva, Senior Market Analyst at Phillip Nova: Initially, the oil market’s focus was on weakening global demand due to economic concerns. However, attention quickly shifted to potential supply disruptions following the Iran-Israel escalation.
- ANZ Analysts: Highlight the potential for supply disruptions due to Iran’s involvement, given the country’s substantial role in the oil market.
The market will closely watch the outcome of the OPEC+ meeting and any developments in the geopolitical situation, as these factors will continue to influence oil prices in the near term.
