Brent crude prices surged past $100 a barrel Wednesday for the first time since July 24, as escalating conflict in the Middle East fueled worries about energy-driven inflation and sent global stocks tumbling ahead of several major central bank decisions.
Brent crude futures were up $2.88, or 2.94%, at $100.80 a barrel by 1210 GMT, after earlier touching $100.95. U.S. West Texas Intermediate crude was up $2.57, or 2.76%, at $95.60 a barrel, its highest level since early June.
Since the Iran war began on Feb. 28, Brent has surged as high as $126.41 a barrel, a peak reached on April 30.
"The move toward and back above $100 Brent is reflecting a market that increasingly has to change its view on how long the Middle East crisis will continue to curb supply from the region," said Ole Hansen, head of commodity strategy at Saxo Bank.
This week, attacks by Iran-backed Houthis on Saudi energy facilities set oil installations ablaze, threatening a significant expansion of the conflict.
The attacks also threaten crude shipments via the Red Sea, which has been a key alternative route to the crucial Strait of Hormuz, where oil flows have been severely curtailed.
In a sharp escalation of the six-month-old war, U.S. forces also hit multiple Iranian oil tankers and Iran targeted a U.S. base in Jordan and attacked ships.
"Market participants appear to be pricing in a more prolonged conflict in the Middle East as well as the risk that the latest escalation in military strikes disrupts oil flows from the Middle East," said Hamad Hussain, senior climate and commodities economist at Capital Economics.
"The key risk is whether the recent attacks on oil tankers lead to fewer ship-to-ship transfers taking place in the Gulf of Oman, which have so far played a key role in providing oil to global markets and keeping a lid on prices."
A tanker carrying about 2 million barrels of Iraqi fuel oil was struck by a drone in Iraqi territorial waters Wednesday, port officials said, while UKMTO, a British navy-linked agency, reported that several merchant vessels in the Gulf had been hit by disabling fire overnight.
In the week before a resumption in fighting on Aug. 30, roughly 8 million to 9 million barrels per day had flowed through Hormuz, double the previous week's volume, according to Rystad Energy's Chief Economist Claudio Galimberti. More recently, flows have fallen below 2 million bpd.
In the physical crude oil market, the dated Brent oil benchmark, against which roughly two-thirds of supply is priced, has been above $100 per barrel since Sept. 3, according to LSEG data.
Physical oil markets react quickly to supply disruptions as buyers need to go into the market to seek alternative cargoes.
Meanwhile, consumers have been paying over $100 for their oil in the form of refined fuels such as gasoline and diesel for most of this year, as conflicts created a global refining crunch which sent fuel prices soaring even relative to crude.
European diesel futures were trading at around $199 per barrel Wednesday, and have not been below $100 per barrel since the start of the Iran war.
Diesel refining margins, or the fuel's premium to crude, have been at all-time highs since August as fuel shortages gripped markets, touching $78.90 per barrel on Sept. 1.
By contrast, the margin averaged $21 per barrel in 2025 and $19.52 in 2024.
"We're in a situation where actually, if we had normal refining margins, crude would be the equivalent of about $150," said Alan Gelder, senior vice-president for refining, chemicals and oil markets at Wood Mackenzie.
Refining is tight globally because of lower exports from the Strait of Hormuz and Russia, and restrained throughputs in Asia, he added.
European gasoline has also been above $100 since March, and its premium to crude neared all-time highs of above $60 per barrel at the start of the month.
In the U.S., consumers faced record gasoline prices over the Labor Day holiday weekend, while diesel prices hit all-time highs last week as supply concerns continued to tighten fuel markets.
"It complicates the picture because central banks around the world are trying to grapple with high inflation," said Nitesh Shah, commodity strategist at WisdomTree.
Stock markets across the globe were also under pressure Wednesday, as the latest surge in energy prices drives concerns that higher inflation will prompt central banks to keep monetary policy tighter for longer.
U.S. stock index futures fell about half a percent, setting Wall Street indexes up for a third consecutive day of losses.
The pan-European STOXX 600 index dropped 1.5% by 1123 GMT, on course for its biggest percentage drop in two months, with economically sensitive banking and industrial stocks among the top decliners.
"$100 is a round number, a psychological number, but the break-even point of oil prices for the developed markets is much higher," said Societe Generale multi-asset strategist Manish Kabra. "We think crude needs to hit $150 to create a major drawback in demand cycle."
However, Kabra cautioned that if price margins for refined products did not decline, "then diesel prices go up and there tends to be a trickle-down impact on inflation and services."
The 10-year U.S. Treasury yield, the benchmark for global borrowing costs, traded at 4.808%. It touched a near three-year high of 4.818% last week as traders ramped up expectations of a tighter monetary policy.
U.S. producer and consumer price reports, set to be released later this week, are seen as a real test for those bets, with policymakers looking for further evidence that inflation pressures are continuing to cool.
Traders assign close to 60% odds for a quarter-point hike or a hold from the U.S. Federal Reserve (Fed) next week, while being all but certain of a quarter-point increase from the Bank of Japan (BOJ) two days later.
The yen strengthened toward the nearly seven-month high touched against the dollar Tuesday as traders exited short positions in the Japanese currency. Expectations are building for faster BOJ hikes and a potential rush of repatriation of Japanese capital.
The euro edged higher ahead of the European Central Bank's (ECB) policy decision Thursday, with markets widely expecting a hike amid inflationary pressures from the Iran war. The currency rose to a more than one-week high of $1.16493.
Both Japan and the eurozone are energy importers.
Sterling edged 0.1% higher at $1.3558. The Bank of England (BoE) is due to announce its latest policy decision next Thursday, with economists predicting the key rate will be on hold for the remainder of this year.
Gold gained 1.1% to around $4,403 an ounce.
