Oil Prices Surge Over 3% as Middle East Conflict Disrupts Key Supply Routes

Oil Market Reaction and Price Levels

As of 01:01 ET (06:01 GMT) on Thursday, Brent Oil Futures expiring in May were up 4% at $84.64 per barrel, while West Texas Intermediate (WTI) crude futures rose 4.2% to $77.75 per barrel. Brent traded just below its highest level since July 2024. Both benchmarks had ended largely flat on Wednesday following a volatile session.

The latest gains reflect mounting geopolitical risk premia as traders respond to the evolving conflict and the potential impact on regional production and transport routes. The Middle East accounts for a significant share of global crude exports, making developments in the region central to market pricing.

Escalating Conflict and Supply Disruptions

The conflict began last Friday when the U.S. and Israel launched coordinated strikes on Iran, triggering retaliatory missile and drone attacks across the region and increasing concerns over the security of critical energy infrastructure. Tensions escalated further this week after the U.S. sank an Iranian warship near Sri Lanka in international waters, highlighting the widening geographic scope of the confrontation beyond the Persian Gulf.

Supply concerns intensified after Iran effectively closed the Strait of Hormuz, one of the world's most important oil transit chokepoints through which roughly a fifth of global oil shipments pass. The disruption has already affected regional producers, with reports indicating that Iraq declared force majeure on some crude exports as shipments through the strait were severely disrupted.

Diplomatic prospects appeared uncertain after reports suggested Iran's Ministry of Intelligence had reached out to Washington to negotiate an end to the conflict. Tehran denied these reports, calling them "pure falsehood" and accusing Western media of spreading misinformation, dampening expectations for a near-term diplomatic resolution.

U.S. Inventory Data

In contrast to the tightening signals from the Middle East, U.S. data pointed to a build in domestic supply. Weekly figures from the American Petroleum Institute (API) showed that U.S. crude stockpiles rose by about 5.6 million barrels in the week ended Feb. 28, well above expectations for a build of 2.2 million barrels. The larger-than-anticipated inventory increase has so far been overshadowed by geopolitical risks driving the market.

FAQ

Why did oil prices rise more than 3% on Thursday?
Oil prices rose due to escalating conflict in the Middle East, including coordinated strikes involving the U.S. and Israel, retaliatory attacks, and the effective closure of the Strait of Hormuz, heightening fears of supply disruptions.

What are the latest Brent and WTI price levels mentioned?
As of 01:01 ET (06:01 GMT), May Brent Oil Futures were at $84.64 per barrel, up 4%, and WTI crude futures were at $77.75 per barrel, up 4.2%.

How has the Strait of Hormuz situation affected supply?
Iran has effectively closed the Strait of Hormuz, disrupting one of the world’s most important oil transit chokepoints and leading Iraq to declare force majeure on some crude exports as shipments through the strait were severely disrupted.

What did the latest API data show about U.S. crude inventories?
The American Petroleum Institute reported that U.S. crude stockpiles rose by about 5.6 million barrels in the week ended Feb. 28, exceeding expectations for a 2.2 million barrel build.