Key facts
- Oil prices have risen above $95 a barrel due to escalating Middle East conflict.
- Renewed US-Iran aggression and Houthi threats to shipping lanes are key drivers.
- The Strait of Hormuz and Bab el-Mandeb strait are central to supply disruption concerns.
- Goldman Sachs forecasts potential prices of $120 a barrel by year-end if disruptions persist.
- Global oil markets have benefited from strategic reserve releases and alternative export routes, but risks remain.
Global oil prices have surged, with Brent crude breaching the $95 a barrel mark for the first time in six weeks, driven by escalating conflict in the Middle East. Renewed US-Iran aggression in the Strait of Hormuz, coupled with Houthi threats against vessels in the Bab el-Mandeb strait, has raised concerns about the continued flow of energy supplies.
US forces have conducted strikes on Iranian military targets for the 12th consecutive night, despite diplomatic efforts. President Donald Trump has threatened intensified strikes and "major military punishment" against Iran and the Houthis if they continue their actions. Iran's foreign minister, Abbas Araghchi, responded with an "eye for an eye" doctrine, warning of a powerful response to any aggression.
Analysts at Goldman Sachs have warned that oil prices could reach $120 a barrel by the end of the year if the Strait of Hormuz remains disrupted. The firm expects oil prices to maintain recent gains through July and August due to declining global inventories, lower Middle East production, seasonal demand, and reduced releases from strategic petroleum reserves.
The International Energy Agency (IEA) noted that global oil markets have so far been cushioned by factors such as the release of approximately 400 million barrels of emergency oil and products by member countries, and efforts by Saudi Arabia and the UAE to export crude via alternative routes. Increased exports from Europe and the Americas, alongside reduced purchases by countries like China, have also helped temper prices. However, the IEA head, Fatih Birol, cautioned against complacency, emphasizing that a resolution to the conflict that fully reopens the Strait of Hormuz is essential for global energy security.
Despite increased crude deliveries, refinery activity and the supply of refined products, such as diesel and gasoline, have remained weak, leading to tighter markets for these fuels. While US and Canadian gas exports have offset some lost supply via the Strait of Hormuz, availability is expected to remain constrained heading into winter as European buyers seek to replenish storage facilities.
Norway's state oil company, Equinor, reported nearly doubled profits of $11.5 billion in the three months to June, attributed to the rise in oil and gas prices caused by the conflict.