Oil prices remained above the crucial $100-a-barrel mark on Thursday as fresh attacks on shipping in the Gulf and Strait of Hormuz heightened concerns about supplies from the Middle East. The market is also dealing with disruptions to US offshore production caused by Hurricane Isaias, adding another layer of uncertainty to an already tight global oil market.
Brent crude futures rose more than 2% to around $102.28 a barrel, while US West Texas Intermediate (WTI) crude gained nearly 2% to around $89.94 a barrel in early trading. The rise came after oil prices had settled lower in the previous session following plans by the International Energy Agency (IEA) to accelerate the release of emergency oil stocks.
The latest gains underline how quickly sentiment in the global oil market can change. Even the prospect of additional barrels from strategic reserves has failed to fully calm traders because the immediate concern is not simply the amount of oil available, but whether it can safely reach international buyers.
The Strait of Hormuz remains at the centre of those worries. Before the conflict, the key waterway handled oil and fuel shipments equivalent to about one-fifth of global supplies. Attacks on tankers have increased in recent weeks, raising insurance, freight and security costs for companies operating in the region.
A tanker north of Qatar was hit by multiple projectiles on Wednesday, with casualties reported by the United Kingdom Maritime Trade Operations agency. The incident added to concerns about the safety of vessels carrying crude and refined petroleum products through the Gulf.
The escalation comes as Gulf producers continue trying to move crude into international markets. That has created an unusual situation: more oil is leaving the region, but shipments are becoming increasingly expensive and risky because of threats to vessels and crews.
Houthi attacks have added to the uncertainty. The Iran-backed group has intensified attacks on Saudi Arabia, including strikes affecting airports in Riyadh and Abha. The escalation has raised fresh questions about the security of regional infrastructure and energy routes.
The wider conflict has also kept investors nervous about the possibility of further disruption. With the US-Israeli conflict with Iran entering its eighth month, traders are closely monitoring developments around the Strait of Hormuz and other important shipping routes.
Weather is creating another supply headache. Hurricane Isaias has disrupted offshore oil production in the US Gulf of Mexico, with producers including Shell and Chevron curtailing operations as the storm approaches. Around 25% of current US Gulf oil production and more than 16% of natural gas production had been shut in because of the storm, according to government data.
The combination of geopolitical tensions and extreme weather has made the supply picture even more complicated. Any prolonged disruption to US Gulf production could further tighten the market at a time when Middle East shipments are already facing elevated risks.
US inventory data also provided support to crude oil prices. Commercial crude inventories fell by 3.2 million barrels in the week ended October 2 to 424.1 million barrels, according to the Energy Information Administration. Analysts had expected a smaller decline of about 1.7 million barrels.
Diesel inventories also declined slightly and remain below their average levels for this time of year. That is particularly important because diesel is widely used in transport, construction, manufacturing and agriculture, making its availability closely linked to broader economic activity.
The IEA has meanwhile agreed to accelerate the release of oil stocks and prioritise diesel supplies under its emergency response plan. The move is designed to ease fuel shortages and bring some stability to markets facing supply disruptions.
However, analysts caution that releasing strategic reserves can only provide temporary relief. It puts additional barrels into the market but does not create new production capacity. If shipping disruptions continue or more production is lost, the effect of emergency stock releases could quickly diminish.
For major oil-importing countries such as India, sustained crude prices above $100 could become a significant economic concern. Expensive oil raises the country’s import bill, puts pressure on the rupee and can increase transportation and production costs. It can also make it harder for policymakers to keep inflation under control.
Indian equities have already reacted to the oil-price surge, with investors worried that higher crude could hurt corporate margins and increase inflationary pressure. Sectors such as aviation, paints, chemicals, logistics and other fuel-intensive businesses are particularly sensitive to a sustained rise in energy costs.
Consumers could eventually feel the impact as well. Higher crude prices can feed into petrol, diesel, transport and manufacturing costs, potentially increasing prices across several parts of the economy.
The immediate outlook for Brent crude and WTI prices will therefore depend on whether the latest shipping attacks escalate, how quickly US Gulf production returns and whether emergency oil reserves can offset supply disruptions.