Global Oil

Global oil prices hit a seven-month high as tensions in the Middle East rise.

London (CNN) - The global oil price rose on Tuesday, 26/03/2024, to its highest level in seven months, partly on concerns that rising tensions in the Middle East could reduce supply.

Brent crude, the global oil benchmark, climbed as much as 1.8 percent to $89 a barrel, its highest since early September, before paring those gains by midday in Europe.

Meanwhile, West Texas Intermediate crude, the US benchmark, also rose 1.8 percent to hit a five-month high of $85 a barrel. Brent and WTI prices are up 15% and nearly 19% since the start of the year, respectively.

This threatens a further rise in gasoline prices in the United States and elsewhere.

Richard Bronze, co-founder and head of geopolitics at data firm Energy Aspects, said the increases in oil prices were the result of a "build-up of momentum" in recent weeks.

"You have ongoing Ukrainian attacks on Russian refineries ... Houthi attacks on shipping in the Red Sea," as well as a "general sense that the Middle East is less stable than it was a year ago," he told CNN.

That's compounded by a slower-than-expected recovery in U.S. oil production after cold weather curtailed work in January, he noted.

Essentially, "you have a situation where the offer is coming in a little while," he said.

Geopolitical tensions

Writing on higher oil prices on Tuesday, Sophie Lund-Yates, chief equity analyst at financial services firm Hargreaves Lansdown, singled out escalating geopolitical tensions in the Middle East following an airstrike on the Iranian embassy in Syria on Monday.

Iran and Syria accused Israel of orchestrating the attack, with Tehran warning of a "severe response".

The Israeli military told CNN it does not comment on foreign reports. However, a military spokesman said Israel believed the target struck was a "military building of the Quds Force" - a unit of Iran's elite Revolutionary Guards responsible for foreign operations.

Passports of officials working for the US-based international aid organization World Central Kitchen (WCK) have surfaced after an Israeli attack on Gaza.

Production cuts announced by the Organization of the Petroleum Exporting Countries and its allies — an alliance known as OPEC+ — were "adding further pressure" on prices, Lund-Yates said.

The bombing of the Iranian embassy in Damascus once again raises the specter that the war between Israel and Hamas in Gaza will turn into a regional conflict that could eventually disrupt the supply of oil to global markets.

Brent prices are nearing $92.40 a barrel - a peak on Oct. 19, less than two weeks after Hamas militants launched an unprecedented attack on Israeli soldiers and civilians, killing more than 1,200 people and abducting about 200 others.

"While the war in Gaza has not significantly disrupted oil supply so far, markets are clearly concerned that an escalation of the conflict could involve major oil-producing countries in the region," said Bill Weatherburn, commodities economist at Capital Economics.

In addition, he added, there are signs that oil demand in China may be increasing. In rare good news for the world's second-largest economy, its official PMI showed the first expansion in manufacturing in six months.