Oil prices surge near $85 per barrel as escalating US-Iran conflict fuels global supply fears

Oil prices surge near $85 per barrel as escalating US-Iran conflict fuels global supply fears

Global oil prices surged by about 14 per cent to nearly $85 per barrel on Tuesday as escalating military hostilities between the United States and Iran intensified fears of prolonged disruptions to global crude supplies and heightened concerns over energy security.

The sharp rally pushed Brent crude, the international oil benchmark, to $84.37 per barrel, up from $76.01 recorded on Sunday. The latest gains extend a strong upward trend that began earlier in the week as investors reacted to renewed military exchanges between Washington and Tehran and growing uncertainty surrounding oil exports from the Middle East.

Market sentiment was further shaken after Iran announced the closure of the Strait of Hormuz, one of the world’s most strategic oil shipping routes. Approximately 20 per cent of global crude oil supplies pass through the narrow waterway, making any disruption a significant threat to international energy markets and global economic stability.

Analysts said fears that the conflict could escalate further prompted traders to increase purchases of crude futures, anticipating tighter global supplies and higher energy costs in the coming weeks.

The rally was also supported by uncertainty over US trade and sanctions policies. In a post on his Truth Social platform, US President Donald Trump announced that he had abandoned a proposed 20 per cent cargo reimbursement fee for vessels using the Strait of Hormuz, opting instead for broader trade and investment agreements with Gulf states.

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According to Trump, Gulf nations have agreed to make “massive” investments in the United States, describing the proposed arrangements as beneficial to both sides. The announcement came after earlier proposals to impose restrictions on Iranian ports had raised concerns about further disruptions to global shipping and crude exports.

Despite the policy shift, energy markets remained focused on the broader geopolitical risks posed by the conflict, including potential attacks on oil infrastructure, tighter sanctions against Iran and prolonged instability across the Gulf region.

The latest price rally marks a dramatic reversal from the downward trend seen in recent weeks. Brent crude had fallen to around $72 per barrel amid easing geopolitical tensions, increased production by OPEC+ members and concerns over slowing global demand before rebounding sharply as tensions between the United States and Iran intensified.

Energy market analysts said the renewed conflict has restored a substantial geopolitical risk premium to crude prices, with investors closely monitoring developments around the Strait of Hormuz and their potential impact on global oil supplies.

Olufemi Idowu, Partner at Kreston Pedabo, said while higher crude prices could boost Nigeria’s earnings, the increase was not yet sufficient to trigger a significant rise in domestic petrol prices.

“I do not expect any major upward review in the local pump price of petrol because oil prices are still significantly lower than the level we had during the war,” he said.

For Nigeria, the sharp increase in crude prices comes at a favourable time as the country records its strongest oil production performance in more than six years.

According to figures released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s average daily crude oil and condensate production rose by 2.3 per cent to 1.74 million barrels per day in June, compared with 1.70 million barrels per day in May.

The combination of stronger production and higher international crude prices could significantly improve Nigeria’s export earnings, foreign exchange inflows and government revenues if the rally is sustained.

However, economists caution that persistently higher oil prices could also increase global inflationary pressures, raise transportation and manufacturing costs and increase the cost of importing refined petroleum products into oil-importing countries.

Investors are expected to keep a close watch on military developments in the Middle East, diplomatic efforts to de-escalate tensions and shipping activity around the Strait of Hormuz, as any further disruption could trigger additional volatility in global energy markets.

Oil prices surge near $85 per barrel as escalating US-Iran conflict fuels global supply fears