Oil prices climb above $106 as Iran targets ships in Strait of Hormuz

Global oil prices rose on Wednesday after two vessels were struck in the Strait of Hormuz and Iranian officials said Tehran was using new tactics against ships, raising concerns about supply disruptions and the impact on the world economy.

Brent crude futures climbed 63 cents, or 0.6%, to $106.32 a barrel by 0345 GMT, while US West Texas Intermediate (WTI) crude gained 66 cents, or 0.7%, to $94.80 a barrel. Both benchmarks had risen by more than $1 earlier in the session before trimming their gains.

The latest increase came after a container ship and an oil tanker were hit by unknown projectiles in the strategic waterway, according to the United Kingdom Maritime Trade Operations (UKMTO) agency.

Iranian officials told Reuters that Tehran had begun using different offensive tactics against vessels it considered to be violating its restrictions around 10 days ago. One official said the change had contributed to an increase in attacks, although the officials declined to provide further details.

The developments have heightened concerns over the security of maritime traffic through the Strait of Hormuz, a critical global shipping route for oil and other energy supplies.

Iran tensions fuel market uncertainty

Market analysts warned that the latest incidents could keep oil prices elevated as traders assess the risks of further attacks and potential supply disruptions.

Priyanka Sachdeva, head of market insights at Phillip Nova, said Iran’s actions highlighted the influence it could exert over global energy markets through its strategic geographic position.

She argued that higher oil prices could place additional pressure on the global economy and complicate US efforts to contain energy costs.

The latest developments come amid the wider US-Iran conflict, which has disrupted energy shipments and increased uncertainty across international oil markets.

Houthi attacks add to supply concerns

Oil prices also received support from escalating tensions between Saudi Arabia and Yemen’s Iran-aligned Houthi movement.

Saudi Arabia’s Energy Ministry said the Houthis attacked an administrative building belonging to state-owned oil giant Saudi Aramco in Dhahran, causing a limited fire.

The group has launched ballistic missiles and drones towards Saudi Arabia over the past week, saying its actions are in retaliation for Riyadh’s support for Yemeni government forces.

According to the report, Riyadh’s international airport has been struck four times, with an attack on Saturday killing 13 people.

Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said concerns about supply disruptions linked to the Houthi-Saudi conflict were pushing prices higher.

However, he said expectations of increased Russian diesel exports could ease pressure on fuel markets and limit further price gains. Kikukawa projected that WTI crude could trade between $90 and $100 a barrel.

Production increases offer limited relief

Oil supply developments elsewhere could help offset some of the market’s concerns.

Saudi Arabia increased production last month despite disruptions to shipments caused by the US-Iran war. The move contributed to a sharp increase in output from OPEC+, the alliance of the Organisation of the Petroleum Exporting Countries and other producers, including Russia, according to figures reported by OPEC on Tuesday.

Meanwhile, Russia’s government said it saw no direct connection between peace negotiations with Ukraine and a deal to export diesel to the United States.

The comment followed a Reuters report that US envoys had told Ukrainian officials the arrangement was part of an effort to encourage Russia to return to negotiations.

For oil markets, the immediate outlook remains tied to developments around the Strait of Hormuz, the scale of regional hostilities and the ability of major producers to maintain supplies.

With attacks on shipping continuing and tensions spreading across the Gulf region, traders face growing uncertainty over whether additional supply disruptions will push prices higher in the coming sessions.