Oil Prices Soar to Five-Month Highs on Escalating Middle East Conflict
Oil markets reacted sharply on Friday as Brent crude and US West Texas Intermediate (WTI) both surged over 9%, reaching their highest levels since January, following Israeli airstrikes on Iranian nuclear and military sites. The sudden escalation in regional tensions has injected fresh uncertainty into global energy markets, with traders bracing for potential disruptions in oil supply.
Price Snapshot (as of 0315 GMT):
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Brent Crude: $75.65 (+$6.29, +9.07%)
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Intraday High: $78.50 (highest since Jan 27)
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WTI Crude: $74.47 (+$6.43, +9.45%)
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Intraday High: $77.62 (highest since Jan 21)
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These moves mark the largest single-day price spikes in oil since Russia’s 2022 invasion of Ukraine, which similarly upended global energy supply chains.
What Triggered the Surge?
Israel announced the beginning of a “prolonged military operation” targeting Iranian nuclear facilities, missile production plants, and top military commanders, in what it called a preemptive move to prevent Tehran from developing nuclear weapons.
Iran’s Supreme Leader Ayatollah Ali Khamenei vowed “harsh punishment,” signaling imminent retaliation. As markets opened in Asia, the fear of an expanding conflict began to ripple through commodities and currency markets alike.
“This has elevated geopolitical uncertainty significantly and requires the oil market to price in a larger risk premium for any potential supply disruptions,” said ING’s Warren Patterson.
Strait of Hormuz in the Crosshairs
At the heart of trader anxiety lies the Strait of Hormuz, a critical chokepoint through which nearly 20 million barrels of oil pass each day — roughly 20% of global consumption.
MST Marquee’s Saul Kavonic warned that while the strike alone may not yet affect shipments, Iranian retaliation or a broader regional escalation could prompt attacks on infrastructure or block passage through the strait.
What’s at Risk:
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20 million barrels/day of oil flows could be threatened
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US intervention could escalate the crisis
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Spillover effects on other Gulf nations remain a risk
Analyst Views: Between Risk Premium and Reality
Market experts caution against premature conclusions. Several Singapore-based oil traders noted that the actual impact on oil supply would depend on:
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The scale and timeline of Iran’s retaliation
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US and Gulf allies’ involvement in the conflict
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The security of shipping lanes, especially Hormuz
“It’s too early to tell, but I think the market is worried about a shutting off of the Strait of Hormuz,” said one veteran oil trader.
Collateral Impact: Global Markets React
The oil rally sparked broad-based selloffs in global equity markets, while safe-haven assets surged:
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Gold prices hit near two-month highs
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Swiss franc and Japanese yen rallied against the dollar
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US stock futures dropped sharply in pre-market trading
What This Means for Pakistan and Global Inflation
For oil-importing nations like Pakistan, the spike in prices poses a direct inflationary threat, especially given the country’s dependence on imported energy. It may also:
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Pressure the rupee amid higher dollar demand
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Worsen the current account balance
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Delay interest rate cuts by the State Bank of Pakistan due to renewed inflation fears
Globally, persistently high oil prices could stall disinflationary trends, derail central bank easing cycles, and trigger commodity-led price shocks in developing economies.
Conclusion: Oil Markets on Edge Amid Fragile Peace
The oil price surge underscores just how tightly geopolitics and energy markets are intertwined. As traders monitor the Iranian response, all eyes are now on the Strait of Hormuz and the potential for a broader conflict that could upend not only supply chains but global economic recovery efforts.
Unless diplomatic efforts can de-escalate the situation swiftly, oil may not only remain volatile but could spike further — possibly breaching $80 per barrel in the near term.
