Oil prices climb to six-week high as Middle East risks intensify

Oil prices closed at their highest level in nearly six weeks on Wednesday, with traders again pricing in the risk that Middle East tensions could disrupt supply routes or production. The move came as hostilities between the United States and Iran continued to escalate, while threats to shipping linked to the Iran-backed Houthi militia in Yemen added to market anxiety, Dawn Business reported from Houston. Brent crude futures settled up $3.06, or 3.36%, at $94.07 a barrel after touching an intraday peak of $95.47. That was the benchmark’s highest close since June 11. US West Texas Intermediate also advanced, rising $2.49, or 2.95%, to $86.83. The latest rally reflects a familiar pattern in oil markets: when the geopolitical backdrop worsens, traders quickly factor in the possibility of tighter supply, higher transport costs and more volatile deliveries. Even without an immediate physical disruption, the prospect of danger along key shipping lanes can be enough to push prices higher, especially when inventories and spare capacity are already being watched closely. One detail that stood out in Wednesday’s trade was the strengthening backwardation in Brent. The three-month timespread widened to $9.26 a barrel, its biggest gap since May 22. In simple terms, that means near-term oil is commanding a stronger premium over later delivery, a market signal that often points to concern about immediate supply availability. For consumers and businesses, the price action matters because crude feeds into fuel costs, freight bills and broader inflation pressures. Airlines, transport operators and manufacturers typically watch these moves closely, while governments and central banks pay attention to the knock-on effects on headline price data. A sustained rise in oil can also complicate efforts to bring inflation fully under control. At the same time, it is still unclear how long the current risk premium will last. Oil prices often react quickly to headlines from the Middle East, but the market can just as quickly unwind gains if tensions ease or if there is no sign of actual disruption to exports and shipping. For now, though, traders appear to be leaning toward caution. The latest gains underline how sensitive energy markets remain to geopolitics. With conflict risks simmering and shipping fears back in focus, oil is being driven less by day-to-day demand data and more by the possibility that a wider regional confrontation could affect supply chains. What happens next will depend on whether the rhetoric turns into concrete disruption. Until then, the market seems likely to stay highly responsive to any new developments involving the US, Iran or maritime security in the Red Sea and Gulf region.

Source: Dawn Business - https://www.dawn.com/news/2017645/oil-hits-six-week-high