Oil prices surged over 1% on Tuesday due to increased geopolitical tensions in Europe and the Middle East, posing threats to global supply chains amidst ongoing conflicts.
Brent crude futures gained $1.08, or 1.3%, closing at $85.33 per barrel, while U.S. West Texas Intermediate crude futures rose $1.24, or 1.5%, to end at $81.57 per barrel.
Despite rebounding from early-June lows of $77.52, Brent remains below its mid-April peak of $90.
The uptick in prices followed a Ukrainian drone strike causing a major fire at an oil terminal in Russia’s Azov port, raising concerns about disruptions to oil supply chains. Azov’s two oil product terminals handled around 220,000 tons of fuel exports between January and May.
Attacks on Russia’s oil infrastructure not only threaten global supply but also heighten risk premiums in crude futures markets.
John Kilduff, a partner at Again Capital, highlighted the vulnerability of Russian energy assets and their significance in global price stability, emphasizing the importance of maintaining their operations.
Meanwhile, Israeli officials hinted at escalating tensions with Hezbollah, raising concerns about broader regional conflicts affecting oil markets.
Market analysts, including Phil Flynn from Price Futures Group, noted the elevated geopolitical risks, stressing the potential for supply disruptions and price volatility.
The oil market also responded to statements from New York Federal Reserve President John Williams regarding gradual interest rate adjustments. However, cautionary remarks from Boston Federal Reserve President Susan Collins tempered market sentiment regarding inflation and economic outlooks.
Additionally, market attention is on upcoming U.S. crude oil inventory data, expected to provide insights into summer demand trends amid ongoing geopolitical uncertainties.