Global oil prices climb back above $100 per barrel over possibility of prolonged Middle East conflict

Global oil prices climbed back above $100 per barrel in just three days as markets grew increasingly anxious about the possibility of prolonged tensions in the Middle East, despite the International Energy Agency’s (IEA) decision to release record amounts of emergency oil reserves.

According to multiple reports, including from Bloomberg, Brent Crude Futures for May delivery reached as high as $101.53 a barrel during intraday trading on Thursday — a surge of more than 10 percent compared to the previous session.

As of 5 p.m., international oil prices were trading at around $95 to $96 per barrel, up roughly 7 percent from the previous session.

West Texas Intermediate (WTI) Crude Futures for April delivery also jumped to around $96 a barrel during intraday trading on Thursday. During the previous session, Brent and WTI closed up 4.8 percent and 4.6 percent, respectively.

Market tensions intensified after Iran expanded its attacks beyond the Strait of Hormuz. On Wednesday, Iran attacked four foreign vessels near the Strait of Hormuz and later targeted an oil tanker in Iraqi waters.

Iran’s Islamic Revolutionary Guard Corps warned that energy prices could not be artificially suppressed and that markets should brace for oil prices to possibly reach $200 per barrel.

On Wednesday, the IEA said its 32 member states would release a total of 400 million barrels of emergency reserves — more than twice the amount released following Russia’s invasion of Ukraine in 2022.

However, analysts say the reserves, which will be released over the course of two to three months, are unlikely to stabilize prices. Australian financial group Macquarie Group noted that the release amounts to roughly four days of global oil production or about 16 days of crude shipments passing through the Persian Gulf region.

Expectations that elevated oil prices will persist also rattled global financial markets. As demand for safe-haven assets increased, the dollar index rose 0.43 percent from the previous day. The dollar-won exchange rate closed at 1,481.2 won, depreciating 14.7 won from the previous session.

Many analysts say future movements in financial markets will depend on how long the Strait of Hormuz remains blocked.

Cho Yong-gu, an analyst at Shinyoung Securities, said that even if the conflict continues through intermittent airstrikes, oil prices would rise moderately only if negotiations resume and the Strait of Hormuz blockade lasts just four to six weeks.

“In that case, global oil prices would increase only slightly, averaging around $80 a barrel for the year,” Cho said. “Korea’s economic growth rate would face downward pressure of about 0.15 to 0.2 percentage points, while inflation could rise by about 0.4 percentage points.”

Meanwhile, analysts say a prolonged period of high oil prices may affect global economies differently.

The Wall Street Journal reported on Tuesday that China may be relatively better positioned than other countries thanks to its strategy of “ramping up the use of [EVs] to replace gas-guzzlers while simultaneously pumping more crude from inside China’s borders.”

“Beyond the Middle East, the Iran war could make Russia an even bigger supplier of energy to China,” the report added.

By contrast, Gulf countries may suffer economic losses despite higher oil prices due to export disruptions caused by a blockade of the Strait of Hormuz, production cuts and damage to the Middle East’s tourism industry, the newspaper said in a separate report on Wednesday.

Korea, however, remains particularly vulnerable because about 70 percent of its crude oil imports come from the Middle East.

Joo Won, the head of research at the Hyundai Research Institute, said the country should focus on securing stable supply chains for crude oil and raw materials in preparation for the possibility of a prolonged oil shock.

“In the mid- to long-term, Korea also needs to restructure its economic and industrial systems to reduce excessive dependence on crude oil,” Joo said.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY OH HYO-JEONG [[email protected]]