Oil edges up as Middle East and Russia hostilities imperil flows

[NEW YORK] Oil gained as hostilities intensified from Russia to the Middle East, threatening supply flows that only recently recovered to near pre-war levels.

Brent settled above US$106 a barrel after Iran-backed Houthi rebels launched missile and drone strikes across Saudi Arabia, including a hit that damaged Saudi Aramco’s headquarters.

That added to an escalation in Iranian attacks on tankers in the Strait of Hormuz that is threatening a rebound in Gulf supply. West Texas Intermediate (WTI) closed 1 per cent higher. 

The two benchmarks have fallen out of lockstep, in part because trend-following commodity trading advisers, which use computer models to bet on price moves, sold the US benchmark more than Brent last week and are now buying it back, said Tim Skirrow, head of derivatives at Energy Aspects.

That means CTAs have more runway to add to bullish bets on WTI compared to Brent. 

Beyond the Middle East, Russia and Ukraine traded tit-for-tat strikes on each other’s energy infrastructure over the past day.

Prices for European diesel, of which Russia has historically been a major supplier, have already more than doubled in 2026 so far. 

“Developments over the past week are yet another reminder that recovering flows are not the same as secure flows,” said Emily Ashford, head of energy research at Standard Chartered Bank.

“With both infrastructure and shipping increasingly vulnerable, the risk premium is proving difficult to unwind.”

SEE ALSO

European shares edge up after solid ASML results, healthcare gains

Nasdaq ends sharply lower as hot inflation data stirs rate hike worries

Brent crude futures, the global benchmark, have surged more than 70 per cent in 2026 as the US-Israeli war on Iran roils markets.

Risks intensified after the Houthis attacked Riyadh’s main airport and Saudi-backed forces launched a campaign to reclaim rebel-held territory in Yemen.

Ship strikes in Hormuz have also prompted more supertankers to turn away from the Persian Gulf, the latest episode of which entailed a targeted container ship sinking in the waterway. 

Meanwhile, the market for real-world barrels remains tight. With freight costs soaring, the Dated Brent benchmark in Europe was near US$130 a barrel on Tuesday as European refiners compete for local supplies.

Shipping oil on the benchmark Middle East-to-China route is holding close to its highest level ever, with prices near US$1.39 million a day.

Still, a plateau in the rally for the US Gulf-to-China route has boosted demand for American barrels as overseas buyers seize a rare window of lower freight costs.

That added demand may be another reason WTI is outpacing Brent on Wednesday, according to traders familiar with the market.

As the Russia-Ukraine war continues to hobble refinery capacity, the International Energy Agency warned that diesel and other fuels will remain under pressure in 2027 as a result of conflicts, despite a weaker outlook for oil consumption.

The agency has urged its members to complete pledges to release emergency stockpiles. BLOOMBERG