Oil prices surged by more than 1% on Wednesday, with Brent crude futures continuing their gains after a record monthly increase in March. This rise comes amidst uncertainty in the Middle East, despite reports indicating that the US-Israeli war on Iran may be nearing its conclusion.
The June Brent futures contract rose by $1.40, or 1.4%, reaching $105.37 per barrel at 04:30 GMT. Brent crude recorded a record monthly gain of 64% in March, according to data from the London Stock Exchange dating back to June 1988.
Event Details
At the same time, US West Texas Intermediate crude futures for May rose by $1.59, or 1.6%, to $102.97 per barrel. Prices recovered some of the losses incurred on Tuesday when June Brent futures fell by more than $3 following unconfirmed media reports that the Iranian president was ready to end the war.
US President Donald Trump told reporters on Tuesday that the United States could end the military campaign within two to three weeks, asserting that Iran is not obligated to reach an agreement to end the conflict, marking his clearest statement yet regarding his desire to conclude the month-long war.
Background & Context
Despite the optimism surrounding the potential end of the conflict, analysts warn that damage to infrastructure may keep supplies tight. Priyanka Sachdeva, a senior market analyst at Phillip Nova, stated that oil prices will depend on how quickly supply chains return to normal after the war concludes.
Sachdeva added, "Even if the escalation begins to recede, the flow of oil tankers will not return to normal immediately... Shipping and insurance costs, as well as tanker movements, will take time to normalize." She noted that the actual damage to oil infrastructure can only be assessed after the war ends.
Impact & Consequences
According to a report published by the Wall Street Journal, Trump indicated that he might end the war before reopening the Strait of Hormuz, a major waterway through which 20% of global oil and liquefied natural gas trade passes. The London Stock Exchange noted in a memorandum that the continuation of diplomatic channels and intermittent statements from the US administration anticipating a near end to the conflict still keep supply risks in a precarious position.
A survey conducted by Reuters on Tuesday showed that OPEC oil production fell by 7.3 million barrels per day in March compared to the previous month, highlighting the impact of forced export cuts due to the closure of the Malacca Strait. Meanwhile, US crude oil production saw its largest decline in two years during January, following a severe winter storm that halted production across vast areas of the country, according to data from the US Energy Information Administration.
Regional Significance
Abdullah Dardari, the UN Assistant Secretary-General and Director of the Regional Office for Arab States, warned that military escalation in the Middle East could cost the Arab region up to $194 billion. Dardari explained in an exclusive interview with Asharq Al-Awsat that these figures reflect a "sharp and sudden economic shock," warning that continued fighting could lead to losses taking the form of a "geometric progression," rapidly multiplying economic and social damages.
On the social front, the UN official issued a stark warning of a "financial bleed" accompanied by a sharp increase in unemployment rates by about 4 percentage points, which effectively translates to a loss of 3.6 million jobs. He cautioned that around 4 million people are now at risk of slipping into poverty within just one month.
In light of these circumstances, the European Commission urged EU member states to take immediate action to reduce domestic fuel demand, given the skyrocketing energy prices resulting from the repercussions of the war in the Middle East. European Energy Commissioner Dan Jørgensen emphasized that the current situation is "prone to worsen," stressing that "reducing demand has become an urgent necessity."
In Jordan, the fuel pricing committee decided to raise fuel prices starting in April by up to 15%. The committee clarified that this increase does not reflect the actual costs of global prices, as the government will gradually compensate for the cost differences resulting from this decision.