Oil Prices Rise Again As Concerns About Middle East Conflict Escalate

Topline

Crude oil prices rose again Wednesday as traders priced in heightened concerns about violence in the Middle East.

Key Facts

International benchmark Brent crude rose 2.7% to about $75.50 per barrel by midmorning, while U.S. benchmark West Texas Intermediate climbed 3% to $72 per barrel.

That’s Brent’s highest level since Sept. 3 and WTI’s highest since Sept. 24.

Brent is up more than 5% this week and WTI almost 6% as oil traders digest a series of escalatory headlines from the key oil-producing region, including missile strikes from Iran on Israel and Israel’s killing of the leader of Hezbollah, Lebanon’s ruling party.

Contra

Despite the recent bump, oil prices remain far cheaper than they were this summer, with Brent down 14% from its July peak, and far lower than the more than $100 per barrel it stood for much of 2022 following Russia’s invasion of Ukraine.

Crucial Quote

“While the geopolitical risk premium rose on Tuesday…this premium remains moderate,” explained Goldman Sachs oil strategist Yulia Zhestkova Grigsby in a Wednesday note to clients, adding it’s “likely” due to an otherwise favorable setup for production.

Key Background

Crude oil prices most directly make their way to consumers as they heavily influence gasoline prices, but they also can lead to higher prices across the board as higher production costs make their way to final prices of goods. The climb in oil prices may throw a wrench in the Federal Reserve’s inflation fight, but the volatile commodity is still well within its normal range of the last year, amid demand concerns from China, the top oil consumer outside of the U.S., and a proposed increase in production from Saudi Arabia, the top oil producer in the Middle East.