US-Iran war: Crude oil prices surged past the $100 a barrel mark on Thursday, March 12, as supply concerns worsened with Iranian attacks on commercial shipping around the Strait of Hormuz, overshadowing the International Energy Agency’s (IEA) decision to release 400 million barrels of crude stocks.
The global benchmark Brent Crude climbed as much as 10.5% to $101.59 a barrel, while West Texas Intermediate jumped to nearly $96 in a fresh jolt to the global markets and world economy. Brent crude prices had touched almost $120 earlier this week.
Back home, crude oil prices on Multi Commodity Exchange (MCX) also witnessed a similar upward trend. MCX crude oil prices surged as much as 7.81% to ₹8,745 per barrel on Thursday.
Why are oil prices boiling again?
The fresh flare-up in crude prices followed Oman’s evacuation of all vessels from its key oil export terminal. At the same time, two tankers were attacked in Iraqi waters, highlighting escalating risks to energy infrastructure across the Middle East.
Oman’s facility is located outside the Strait of Hormuz and is among the limited ports through which Middle Eastern crude can reach global markets.
Iraq has also suspended operations at its oil terminals after tankers came under attack, the head of the General Company for Ports of Iraq told the state-run Iraqi News Agency. The incidents underscore rising risks to shipping across the Middle East, not just in Hormuz, which remains largely shut.
Iraq was among the first Persian Gulf producers to begin cutting output following the near-closure of Hormuz, with Kuwait and Saudi Arabia subsequently implementing similar measures, as per the Bloomberg report.
The supply reductions prompted the IEA to coordinate a release of 400 million barrels of oil — a historic drawdown exceeding the volumes released after Russia invaded Ukraine in 2022.
The United States said it plans to release 172 million barrels as part of the global effort to ease prices. Worldwide oil consumption stands at just over 100 million barrels per day, and Gulf producers have already cut about 6% of that supply. Further reductions in the Middle East remain possible.
Crude oil prices outlook
According to brokerage firm Choice Institutional Equities, in the current conditions, as the Strait of Hormuz remains closed, for the market to rebalance, roughly 20 million barrels of demand destruction may be required – a level that could occur if Brent reaches above $130 per barrel.
Despite a physical disruption of 7–11 mb/d, the surge in Brent suggests the market is pricing a much larger effective deficit of ~20 mb/d, reflecting precautionary demand and panic-driven hoarding to gather pace over the coming days.
“Provided Hormuz maintains the status quo into the 4th week without negotiations between the US-Israel and Iran in place, the market may enter the scarcity-premium phase as floating inventories diminish and marginal storage tightens. In such a scenario, price moves tend to accelerate sharply, which could push Brent towards ~USD 130/b by the end of next week,” the firm said in a note.
(With inputs from Bloomberg)
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