Oil prices have surged above $90 a barrel, reaching their highest level since June, as military tensions between the United States and Iran escalate to unprecedented heights. Brent crude, the global benchmark, has climbed 2.7% to $90.49 a barrel, briefly touching $91.41, in response to renewed US military action against key targets in southern Iran, Jordan, and Iraq.
The conflict's escalation marks a significant reversal of fortune for the fragile ceasefire agreement signed just a month ago. As tensions intensify, Iran has expanded its retaliatory actions beyond military sites, reportedly targeting critical infrastructure across the Gulf, including power and desalination facilities in Kuwait. Drone and missile attacks have been launched towards US bases and regional allies, while the Strait of Hormuz has become increasingly volatile.
Morgan Stanley analysts have issued a stark warning regarding Europe's diesel supply, predicting a significant squeeze over the coming months. They forecast that stockpiles will decline steadily from August to reach multi-year lows by November, with inventories potentially falling to approximately 299 million barrels – their lowest level for that time of year since at least 2015.
The deteriorating situation in the Middle East is already having a ripple effect on other sectors. Budget airline Ryanair has reported an average fare decrease of 6% for the first quarter, citing consumer hesitancy and concerns about EU jet-fuel shortages as key factors. Despite a slight uptick in booking volumes, the airline expects second-quarter pricing to trend modestly down year-on-year.
The rapid rise in oil prices and the fresh wave of strikes underscore the swift deterioration of the situation, according to Jim Reid of Deutsche Bank. The British military has also reported a ship fire in the Strait of Hormuz near the Omani coastline, although the cause remains unclear. Iran's Revolutionary Guard later claimed two oil tankers had exploded and been immobilised.