Brent crude oil climbed 3% to $112 per barrel on Thursday, marking its highest level since 18 May, following a series of security incidents in the Middle East. Yemeni Houthi forces aligned with Iran conducted strikes against targets in Saudi Arabia on Wednesday, resulting in casualties at a civilian airport in Dammam and damage to an oilfield facility. Additionally, the Iranian Islamic Revolutionary Guard Corps reported that vessels engaged in what it characterized as illegal oil transfers were struck and caught fire in the northern Gulf, while three other ships collided with mines west of the strait of Hormuz.
The incidents prompted heightened security responses from multiple parties. The United States ordered the departure of some diplomatic personnel and their families from missions in Saudi Arabia and indicated plans to withdraw family members from other Middle Eastern posts. Saudi Aramco, the kingdom’s state oil company, instructed its headquarters staff in Dhahran to work remotely following the attacks. Regional tensions have intensified following the breakdown of a memorandum of understanding between the US and Iran, raising concerns about further escalation nearly eight months after earlier hostilities.
Historically, oil markets experienced significant volatility during previous phases of regional conflict. Prices had surged above $100 per barrel following US-Israeli operations against Iran, with analysts projecting potential increases to $150 per barrel. Oil reached a peak of $126 per barrel in April before declining to below $100 in late May and subsequently dropping to $71 in early July as ceasefire hopes emerged. Current data indicates that Persian Gulf oil exports have nevertheless exceeded prewar levels, supported by increased overland pipeline transportation to the Red Sea and Gulf of Oman.
Global equity markets reflected investor concern over inflation and rising borrowing costs. European markets declined, with the Stoxx Europe 600 index falling 1% and London’s FTSE 100 dropping 0.7%. Asian exchanges experienced steeper losses, including a 2.7% decline in Japan’s Nikkei 225 and a 3.5% drop in South Korea’s Kospi. American Airlines shares fell nearly 4% in early trading after the carrier withdrew its profit guidance, citing historic fuel cost pressures that would result in a loss for the year.
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