Brent crude climbed 3% to $112 a barrel on Thursday, marking its highest level since mid-May, as geopolitical tensions in the Middle East escalated. Houthi forces aligned with Iran launched attacks on Saudi targets, resulting in casualties at a civilian airport in Dammam and a drone strike on an oilfield. Additionally, Iran’s Islamic Revolutionary Guard Corps reported striking vessels engaged in what it characterized as illegal oil transfers in the northern Gulf and warned of potential expanded military action if provocations continued.
The incidents prompted the United States to order a partial evacuation of diplomatic staff and family members from missions in Saudi Arabia and other Middle Eastern locations. Saudi Aramco, the kingdom’s state oil company, instructed employees to leave its Dhahran headquarters and transition to remote work arrangements. These developments intensified concerns about potential regional escalation, particularly given the volatility experienced earlier in the year when similar tensions drove significant price swings.
Oil markets had experienced considerable turbulence throughout the preceding months. Prices had surged past $100 a barrel following earlier US-Israeli military actions against Iran and peaked at $126 in April before declining to the low $70s by early July as ceasefire hopes emerged. Prices subsequently recovered as diplomatic efforts between Washington and Tehran deteriorated and fresh hostilities resumed in the Gulf region.
Despite the price increases, data indicated that oil exports from the Persian Gulf had recovered to above pre-conflict levels, supported partly by expanded pipeline capacity redirecting crude toward the Red Sea and Gulf of Oman. Global equity markets responded negatively to the price surge and expectations of higher inflation and borrowing costs. Major European indices declined, with Asian markets posting steeper losses. American Airlines warned that elevated fuel expenses would force the company into a loss this year, abandoning its prior profit forecast due to what it described as historic fuel cost pressures.
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