Global oil price hits seven-month high as Middle East tensions rise

London (CNN) — The global price of oil rose Tuesday to its highest level in seven months, propelled, in part, by concerns that mounting tensions in the Middle East could crimp supply.

Brent crude, the world’s oil benchmark, climbed as much as 1.8% to $89 a barrel, the highest since early September, before paring those gains slightly mid-afternoon in Europe.

Meanwhile, West Texas Intermediate crude, the US benchmark, also rose 1.8% to reach a five-month high of $85 a barrel. Brent and WTI prices have risen 15% and almost 19% since the start of the year, respectively.

This threatens a further rise in gasoline prices in the United States and elsewhere.

Richard Bronze, co-founder and head of geopolitics at data firm Energy Aspects, said oil price rises were the outcome of a “build-up of momentum” over the past several weeks.

“You’ve got ongoing Ukrainian attacks on Russian refineries… Houthi attacks on shipping in the Red Sea,” as well as a “general sense that the Middle East is less stable than it was a year ago,” he told CNN.

Added to that is a slower-than-expected recovery in US oil production since cold weather curtailed operations in January, he noted.

In essence, “you have a situation where supply is coming in a bit short,” he said.

Geopolitical tensions

Writing about higher oil prices Tuesday, Sophie Lund-Yates, lead equity analyst at financial services company Hargreaves Lansdown, singled out escalating geopolitical tensions in the Middle East following an airstrike on Iran’s embassy in Syria Monday.

Iran and Syria have accused Israel of authoring the attack, with Tehran warning of a “serious response.”

The Israeli military told CNN it does not comment on foreign reports. However, a military spokesperson said Israel believes the target struck was a “military building of Quds forces” — a unit of Iran’s elite Revolutionary Guards responsible for foreign operations.

Production cuts announced by the Organization of the Petroleum Exporting Countries and its allies — an alliance known as OPEC+ — were “adding further pressure” to prices, Lund-Yates said.

The bombing of Iran’s embassy in Damascus once again raises the specter that the war between Israel and Hamas in Gaza will spill over into a regional conflict that could ultimately disrupt the supply of oil to world markets.

Brent prices are edging closer to $92.40 a barrel — a peak hit on October 19, less than two weeks after Hamas militants launched an unprecedented attack on Israeli soldiers and civilians, killing more than 1,200 people, and kidnapping some 200 others.

“Although the war in Gaza has not significantly disrupted oil supply so far, markets are clearly worried that an escalation in the conflict could come to involve the major oil-producing countries in the region,” said Bill Weatherburn, commodities economist at Capital Economics.

Moreover, he added, there are signs that oil demand in China may be picking up. In rare good news for the world’s second-biggest economy, its official purchasing managers’ index showed the first expansion in manufacturing in six months.

The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.