Global oil prices strengthened again during trading on Friday (October 23), with Brent crude touching US$114 per barrel for the first time since May. The rise was driven by escalating geopolitical tensions in the Middle East, which have sparked concerns over potential disruptions to global energy supplies. Brent rose 0.4% to US$113.62 per barrel, putting it on track for a weekly gain of more than 3%. Meanwhile, U.S. West Texas Intermediate (WTI) crude climbed 0.8% to US$100.26 per barrel, though it still recorded a weekly decline of over 1%.
Concerns regarding the stability of oil supplies from the Persian Gulf region are the primary factor pushing prices higher. Analysts at ING suggest that the current rally is driven more by the heightened risk of supply disruptions than by shifts in the fundamentals of supply and demand. Market sentiment soured further following reports that the United States and Israel are considering potential follow-up strikes against Iran after the U.S. midterm elections in November. Iran has reportedly threatened to retaliate against any new attacks, potentially targeting economic facilities and civilian infrastructure. This situation has fueled fears of an escalation in the conflict, which could disrupt oil distribution from one of the world’s largest energy-producing regions.
Tensions have intensified further following renewed attacks by the Houthi group in Yemen on several locations in Saudi Arabia. On Thursday, the state-owned energy company Saudi Aramco reportedly ordered the evacuation of its headquarters in Dhahran as a precautionary measure against security threats. These developments have raised concerns that a reignited conflict could hinder the recovery of oil export flows from the Gulf region. In fact, previously reported shipping data indicates that the volume of oil leaving the region has surpassed levels seen before the onset of joint U.S.-Israeli strikes against Iran in late February. Outside the Middle East, supply disruptions have also emerged in Libya following the closure of a pipeline valve connecting the Hamada and Tahara oil fields to the port of Zawiya, which has led to a decline in production at both sites.
Future oil price movements are expected to remain heavily influenced by developments in the Middle East conflict, as well as the ability of producing nations to maintain supply stability. Heightened risks of energy export disruptions could sustain a geopolitical risk premium in oil prices—particularly if threats to distribution routes in the Persian Gulf intensify. A sustained rise in oil prices could also exacerbate global inflationary pressures, increase production and transportation costs, and complicate efforts by central banks to loosen monetary policy. Conversely, should geopolitical tensions subside and supply flows remain stable, oil prices could undergo a correction following their gains in recent sessions.