Oil surges as regional conflict widens

Oil prices jumped more than 7 per cent after Iran fired missiles towards US forces and Saudi Arabia joined American strikes against Iran-aligned militias in Iraq, reviving fears of a broader conflict disrupting Middle Eastern energy supplies.

Brent crude rose 7.92 per cent to $90.75 a barrel during Wednesday’s trading, while West Texas Intermediate gained 6.94 per cent to $84.76. The advance reversed much of a 16 per cent fall over the previous three sessions, the sharpest three-day decline in crude prices since 2020.

The market reaction reflected concern that fighting was spreading across oil-producing states and strategic shipping routes. Iran’s Islamic Revolutionary Guard Corps said it launched ballistic missiles at Muwaffaq Salti Air Base in Jordan, a major hub used by US forces. Jordan said its military intercepted and destroyed five Iranian missiles.

US Central Command said all missiles aimed at American forces were intercepted. It later announced that US and Saudi aircraft had attacked logistics and weapons facilities used by Iran-backed groups in eastern Iraq.

The operation marked the first publicly acknowledged occasion on which Saudi Arabia had joined the US in military strikes during the five-month conflict. Saudi authorities said the raids followed more than 30 drone attacks directed at American and Saudi energy infrastructure over a 72-hour period.

Saudi Arabia’s Defence Ministry said the kingdom did not seek escalation but would respond to aggression. Air defence systems had intercepted several drones targeting petroleum installations in the country’s eastern region, where much of its production and processing capacity is concentrated.

Iraq’s Popular Mobilisation Forces said at least 20 members were killed and 32 wounded when several bases were struck. Iraqi militia officials also reported the deaths of Iranian military advisers. The raids drew condemnation from Iraq’s National Security Council, which said they violated the country’s sovereignty and undermined government efforts to investigate cross-border attacks.

The militias denied responsibility for strikes on Saudi facilities. The Islamic Resistance in Iraq described Riyadh’s allegations as fabricated and suggested that Yemen’s Houthi movement had carried out the attacks.

The dispute has placed Baghdad in an increasingly difficult position. The Popular Mobilisation Forces are formally incorporated into Iraq’s security establishment, but several factions retain their own command structures and maintain close links with Tehran.

Prime Minister Ali al-Zaidi has ordered an investigation into allegations that Iraqi territory was used to attack neighbouring countries. His government has also given armed groups until September 30 to surrender weapons outside state control, though powerful factions including Kataib Hezbollah have rejected disarmament.

A planned visit by Al-Zaidi to Saudi Arabia was postponed following the strikes, adding diplomatic strain at a time when Baghdad is trying to balance relations with Washington, Tehran and Gulf governments.

Supply concerns were intensified by developments at sea. The Revolutionary Guard said its naval forces had intercepted three oil tankers in the Strait of Hormuz, the narrow waterway through which about a fifth of the world’s traded oil normally passes.

The Houthis have also declared a blockade on Saudi shipping in the Red Sea and claimed an attack on the Saudi-flagged tanker NCC Ghazal. Maritime authorities reported explosions near a tanker in the southern Red Sea, although the crew and vessel were safe.

Saudi Arabia has stopped loading crude for export through the Bab Al Mandeb route since the Houthi blockade began. That disruption has forced some cargoes destined for Asian buyers to take longer routes, raising freight, fuel and insurance costs.

Shipping risks have become as important to oil markets as production capacity. Even when exporters can pump additional crude, restrictions around Hormuz and the Red Sea may prevent supplies from reaching refiners quickly enough to calm prices.

The escalation also followed reports of fires involving gas vessels at Egypt’s Mediterranean port of Damietta. A US-owned floating storage tanker and a Greek-owned vessel were affected, though responsibility for the incidents remained unclear and no casualties were reported.

US forces subsequently carried out what Central Command described as a heavy wave of strikes against Iran. Dozens of Revolutionary Guard targets were hit over two hours, including command centres, missile and drone facilities, coastal surveillance installations and air defence positions.

The attacks further weakened prospects for negotiations after a brief pause in fighting had encouraged expectations of reduced military activity. With Iran, Saudi Arabia, Iraq, Jordan, Yemen and Egypt now affected by attacks or interception operations, traders are placing a larger geopolitical premium on crude contracts.