Brent crude hits five-month high as Middle East tensions escalate

Oil prices surged to their highest level in more than five months on Friday, with Brent crude climbing above $115 a barrel amid escalating tensions in the Middle East. The price gains came after Iran-backed Houthi militants claimed attacks on Saudi Arabian infrastructure, including the Red Sea port of Yanbu and oil and airport facilities, raising fears of wider disruption to global energy supplies.

Iran's government warned that it would target oil facilities, undersea cables, datacentres, and artificial intelligence infrastructure in the Gulf region if a new US-Israeli military offensive against Iran were launched. These threats, combined with ongoing concerns about the Strait of Hormuz—a critical chokepoint for crude exports—prompted traders to reassess supply risks. By late Friday, Brent crude futures had gained $1.40 to $1.99 per barrel, or between 1.2 and 1.76 per cent, reaching $115.16 at its highest point. US West Texas Intermediate crude rose similarly, gaining $1.48 or 1.5 per cent to $100.95.

Market analysts attributed the price surge to multiple supply vulnerabilities. UBS analyst Giovanni Staunovo noted that volatile oil flows and elevated freight rates have left markets undersupplied, while XS.com analyst Linh Tran highlighted that the duration and extent of operational disruptions would determine whether elevated prices would persist. Saudi Aramco ordered the evacuation of its Dhahran headquarters near Bahrain as clashes between Houthis and a Saudi-led coalition intensified. In Libya, production reductions occurred when an oil pipeline valve was shut at the Hamada and Tahara oilfields. A US State Department representative stated that the US was prepared for a prolonged standoff with Iran and suggested that the Strait of Hormuz might not recover to pre-conflict shipping levels within a year.

The oil price surge occurred against a backdrop of weakening global economic sentiment. Retail sales in Great Britain fell more sharply than expected, with the Office for National Statistics reporting a 0.4 per cent month-on-month decline in September sales volumes—significantly steeper than economists' consensus forecast of 0.1 per cent. UK consumer confidence also plunged by 11 percentage points in October to -24, marking the fastest single-month decline outside the Covid pandemic since the 2016 Brexit referendum, as households absorbed the cumulative impact of rising living costs and broader economic uncertainty linked to Middle East escalation.