Brent crude holds near $96 as Middle East supply risk persists

Brent crude held above $96 a barrel in early Asian trade Thursday, with traders pricing in the risk of prolonged supply disruptions after the most significant U.S.-Iran exchange of fire since July. The global benchmark settled at $95.52 on Wednesday, down 11 cents, while WTI rose 29 cents to $91.30, with both contracts touching six-week highs during the session.

"The market will watch out if the U.S. strike earlier this week was one-off event or not," said Giovanni Staunovo, energy analyst at UBS.

U.S. strikes on Iranian military targets Tuesday night killed 18 people and wounded 108, according to Iran's health minister. The conflict, which began with U.S.-Israeli strikes at the end of February, is in its seventh month. Six commodity vessels transited the Strait of Hormuz on Wednesday, down from 11 a day earlier and well below the 10-day average of around 13, preliminary shipping data showed. Iran has added ships to its list of vessels deemed non-compliant and subject to fines, confiscation or detention if they attempt to cross the strait.

The geopolitical premium on crude remains the key variable for price direction. If the U.S. strike proves to be a one-off, Brent could retreat toward the mid-$90s as market adaptability grows. If the conflict escalates further, the benchmark could test the $100 level that Capital Economics projects for year-end.

Israeli Defence Minister Israel Katz renewed warnings that Israel would "cripple" Iran's military and civilian infrastructure, including energy facilities, if Tehran launched attacks against it. Saxo Bank analyst Ole Hansen said Katz's comments helped push oil prices higher. Vice President JD Vance said the U.S. will not hold talks with Iran unless Tehran stops attacking commercial shipping in the Strait of Hormuz.

Goldman Sachs estimates total Persian Gulf exports at 15 million to 16 million barrels a day, roughly two-thirds of pre-war levels, when accounting for "dark" tanker crossings with tracking signals switched off. Visible flows stand at about 10 million barrels a day. Red Sea flows fell by 4.5 million barrels a day in August as Saudi Arabia redirected shipments from Yanbu to eastern ports because of Houthi-related security concerns, Goldman data shows.

"The oil market remains tight, with oil inventories still declining globally translating into higher prices," Staunovo said.

Capital Economics forecasts Brent at $100 a barrel by year-end, before falling back to $70 by the end of 2027, as the recovery in Middle East energy flows is now expected to be delayed. Rather than returning to prewar levels during the second half, the firm assumes the existing status quo will persist through the remainder of the year, with energy flows only normalizing in early 2027.

The risk premium faces a counterweight from Russia. President Vladimir Putin signaled openness to peace negotiations with Ukraine, which could ease concerns about Russian fuel supply disruptions if attacks on refineries decline and production normalizes, said Phil Flynn of Price Futures Group.

Iraq, meanwhile, increased oil exports to around 2.34 million barrels per day in August from about 1.35 million in July, with September exports also expected to rise as heavy discounts and Iranian approvals for Iraqi tankers encouraged buyers.

The elevated crude price has rippled across markets. Gold futures rose 2.3 percent to $4,514.40 a troy ounce, while the U.S. 10-year Treasury yield hovered near 4.81 percent, close to a three-year high. India's VIX volatility index touched an intraday high of 12.11 before easing, as higher energy costs stoked inflation concerns across Asian economies.

This article is for informational purposes only and does not constitute investment advice.