Oil prices continue to surge and have now reached a four-year high amid the war between the United States, Israel and Iran. On Thursday, Brent crude prices surged past $120 per barrel, the loftiest since March 2022.
According to data accessed by Reuters, Brent crude futures rose to $122.31 a barrel and then to $126.41, marking a new intraday high.
The last time crude prices saw a major surge was at $130 a barrel on March 9, 2022, due to the escalation of the Russia-Ukraine war.
Now, with the war on Iran triggering a global energy crisis due to the blockade of the Strait of Hormuz, Brent crude prices are expected to rise further.
Along with Brent crude, US West Texas Intermediate futures rose to $108.34 a barrel, the highest since April 7.
Before the start of the US-Iran war, Brent crude was trading around $70 per barrel.
What has caused the surge in oil prices?
Recent developments in West Asia have caused major disruptions to oil and gas supply chains. Amid a global energy crisis, the blockade of the Strait of Hormuz has severely impacted the transit and shipments of crude, for which the Gulf region is a key source.
The Strait of Hormuz, located between Iran and Oman, is a vital passage for 20 per cent of the world’s oil and gas supply.
After the war broke out on February 28, Iran announced it would be closing the Strait, causing countries across the world to adopt measures to save on gas supply. While certain countries, such as India and France, were allowed to move their ships, many vessels remain stranded in the key strait.
Adding to this chokehold, the United States announced its own blockade in the Hormuz Strait, which will be limited to Iranian ports.
While Iran has still been able to trade oil using shadow fleets, the blockade of its ports has pushed oil prices higher.
The most recent development also saw the United Arab Emirates withdrawing from the Organization of the Petroleum Exporting Countries (OPEC) has also added to the tensions. However, experts believe that the UAE’s exit will cause limited damage.
“In the near term, market participants remain focused on the dynamics of the US.-Iran conflict and the risk of a prolonged closure of the Strait of Hormuz,” OANDA senior market analyst Kelvin Wong told Reuters.
“This focus currently outweighs the long-term implications of the potential waning influence of OPEC following the UAE’s (United Arab Emirates) exit from the cartel,” Wong added.
US-Iran talks stalled
The peace talks between the US and Iran remain stalled. While the Iranian delegation, led by foreign minister Abbas Araghchi, arrived in Pakistan and presented another proposal for the truce, the American team skipped the talks.
US President Donald Trump first pulled Vice President JD Vance out of the talks, stating that special envoy Steve Witkoff and Jared Kushner would lead the delegation.
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However, on the day the delegation was supposed to depart for Pakistan, Trump told reporters that the US would not be going for the negotiations.
The talks are currently deadlocked due to the US’s insistence that Iran kill its nuclear programme. Iran, on the other hand, has refused to do so and demanded economic compensation for the war, along with control over the Strait of Hormuz.
“The breakdown of talks between the US and Iran, along with President Trump reportedly rejecting Iran’s proposal for a reopening of the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows,” ING Bank strategists Warren Patterson and Ewa Manthey wrote in a research note, reported Associated Press.