Crude oil prices surge toward $100 as Middle East tensions escalate

Crude oil prices extended gains on Wednesday, rising approximately 2% as market participants reacted to a significant escalation in Middle East hostilities and a breakdown in diplomatic communication between Tehran and Washington.

Brent crude futures rose $1.68, or 1.75%, to $97.68 a barrel, while U.S. West Texas Intermediate (WTI) crude increased $1.99, or 2.12%, to $95.75.

The upward price trajectory follows reports of ballistic missile launches toward Kuwait and Bahrain, resulting in casualties, and subsequent U.S. military strikes on Qeshm Island.

Analysts note that the prospects for a near-term ceasefire appear to be diminishing.

While U.S. leadership has indicated that negotiations remain a priority, Iranian reports suggest that communication through intermediaries has been suspended, pending a resolution to the ongoing conflict in Lebanon.

The geopolitical instability has further tightened global energy supply chains.

The continued closure of the Strait of Hormuz remains a primary concern for the market, acting as a significant bottleneck for global oil flows.

This supply-side pressure is compounded by warnings from the International Energy Agency (IEA), which has cautioned that global oil inventories are approaching critical levels ahead of peak summer demand.

Market data from the Energy Information Administration (EIA) supported these supply concerns, reporting that U.S. crude stockpiles dropped by 8 million barrels to 433.7 million barrels in the week ended May 29.

The decline was double the 4-million-barrel draw projected by analysts in a Reuters poll, driven by robust demand for exports and domestic refining.