Brent oil spiked to $107 a barrel, before paring some gains, as rising tensions in the Middle East heightened concerns over global supplies.
The global benchmark extended a rally that saw futures jump to triple figures for the first time since July in the previous session. Renewed fighting over the past week has ended a period of relative calm, and the prospect of a lengthy conflict is fanning renewed fears of energy-driven inflation as prices for natural gas and diesel also surge.
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Iran signaled it has no intention of backing down in the face of an American naval blockade and will escalate its strikes if the US continues attacking its territory. Meanwhile, Tehran-backed Houthis in Yemen are targeting Saudi Arabian assets, with the Kingdom warning its crude production plunged last month to the lowest since 1990.
“Crude is trading at its highest levels since May as the market reprices both the escalation and, increasingly, the duration of geopolitical risk,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “As prices push into levels where options dealers have meaningful short-gamma exposure, that positioning is adding fuel to the move higher this morning.”
