Oil Prices Surge as Middle East Conflict Disrupts Supply
Oil prices extended their rally for a fourth consecutive day on Tuesday, driven by growing supply concerns linked to the escalating Middle East conflict. Brent crude is on track for its largest monthly gain on record, while U.S. crude futures are heading for their strongest monthly increase since 2020.
Brent and WTI Hit Multi-Week Highs
Brent crude futures for May rose $2.26, or 2%, to $115.04 per barrel, reaching their highest level since March 19 during the previous session. The more actively traded June contract stood at $108.96.
Meanwhile, U.S. West Texas Intermediate (WTI) crude futures for May climbed $3.10, or 3%, to $105.96 per barrel, marking their highest level since March 9.
Strait of Hormuz Closure Drives Record Gains
A key driver behind the surge in oil prices has been Iran’s effective closure of the Strait of Hormuz, a critical passage that handles nearly 20% of global oil supply and a large share of liquefied natural gas shipments.
As a result, Brent crude has jumped 59% so far in March, its strongest monthly performance on record. WTI crude has also surged 58%, marking its biggest monthly gain since May 2020.
Rising Threats to Global Energy Supply Routes
The ongoing conflict between Iran, the United States, and Israel is raising serious concerns about global energy transportation.
Kuwait Petroleum Corporation reported that its fully loaded tanker Al Salmi, capable of carrying up to 2 million barrels of crude oil, was struck in an alleged Iranian attack near Dubai. Authorities also warned of potential environmental risks, including oil spills.
Bab el-Mandeb Strait Faces New Risks
Tensions escalated further after Yemen’s Iran-aligned Houthi forces launched missile attacks targeting Israel, increasing fears of disruptions in the Bab el-Mandeb Strait.
This vital shipping route connects the Red Sea to the Gulf of Aden and is essential for global trade between Asia and Europe via the Suez Canal.
Market analysts warn that simultaneous disruptions in both the Strait of Hormuz and Bab el-Mandeb could create a severe supply shock for global energy markets.
Saudi Oil Exports Rerouted
In response to rising risks, Saudi Arabia has redirected crude shipments through alternative routes. Exports via the Red Sea port of Yanbu surged to 4.658 million barrels per day last week, a sharp increase from around 770,000 barrels per day in the first two months of the year, according to Kpler data.
Trump Warns of Escalation as Talks Continue
U.S. President Donald Trump warned that the United States could target Iran’s energy infrastructure if Tehran fails to reopen the Strait of Hormuz. This follows Iran’s rejection of U.S. peace proposals and continued military actions, including missile strikes on Israel.
Despite rising tensions, the White House indicated that diplomatic talks with Iran are ongoing, although officials acknowledged a gap between Iran’s public stance and private discussions.
Markets See No Clear Resolution
Analysts remain skeptical about a near-term resolution to the conflict. According to market experts, both sides remain far apart in their demands, limiting the likelihood of a quick de-escalation despite optimistic signals from political leaders.
