Brent Climbs Past $95 as Fresh US-Iran Tensions Raise Supply Concerns

Oil prices moved back above the $95/bbl level in early September as renewed military clashes between the US and Iran brought Middle Eastern supply risks and Strait of Hormuz shipping disruptions back into focus. Falling inventories and threats to regional energy infrastructure added further support to prices, although higher Iraqi exports and hopes for a potential Russia-Ukraine peace agreement offered some downside pressure.

Brent's weekly average has increased by around $4.6/bbl to $94/bbl so far during the week beginning August 31, based on four trading sessions through Thursday. This compares with an average of approximately $89.5/bbl in the previous week. WTI has also recorded a significant weekly increase.

At the time of writing, Brent crude futures were trading at $95.03/bbl, down 49 cents, or 0.5%, on the day. WTI futures stood at $90.74/bbl, lower by 56 cents, or 0.6%.

Renewed US-Iran Conflict Brings Middle East Supply Risks Back

The latest price increase has been largely driven by another escalation in the seven-month US-Iran conflict. Recent US attacks on Iran represented the most intense confrontation between the two sides since July, while Israel has again warned that Iranian military, civilian and energy infrastructure could come under attack.

Concerns over oil supplies have increased further because of renewed uncertainty surrounding the Strait of Hormuz. Iran has expanded the list of vessels it considers non-compliant and could potentially subject them to fines, confiscation or detention.

Shipping activity through the waterway remains heavily restricted. Only four commodity vessels were observed crossing the strait on Thursday, compared with a 10-day average of 15 vessels and approximately 125 commercial vessels per day before the conflict.

The latest developments have also strengthened the near-term outlook for crude prices. ANZ raised its short-term Brent forecast to $95/bbl, warning that inventories that initially helped absorb the supply shock are being drawn down, leaving the market more exposed to additional disruptions.

Higher Iraqi Exports Provide Limited Supply Relief

Additional Iraqi barrels have provided some relief from the broader disruption to Gulf supplies. Iraq's oil exports rose to approximately 2.34 million bpd in August, up from 1.35 million bpd in July. The increase was supported by substantial discounts and Iranian approvals that allowed Iraqi tankers to pass through the Strait of Hormuz.

Iraq's exports are expected to increase further in September. However, shipments remain significantly below pre-conflict levels of more than 3.3 million bpd, limiting their ability to fully replace lost regional supply.

OPEC+ Expected to Maintain Current Production Policy

OPEC+ is widely expected to leave its oil production policy unchanged when key members meet on Sunday. The group has completed the phased restoration of a 1.65 million bpd tranche of voluntary production cuts and is now increasingly focused on establishing production baselines for 2027.

Despite higher production targets, actual supply has struggled to rise at the same pace. The Iran conflict has disrupted Gulf exports, while the Russia-Ukraine war has affected Russian and Kazakh oil flows.

Russia has also indicated that its oil production is expected to decline slightly this year, although officials have characterized the reduction as temporary.

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