Brent crude climbs above $115 on geopolitics

Brent crude oil has climbed to just above $115 a barrel, marking its highest level in more than five months and putting the benchmark within about 4% of its March war-time high. In Friday trading, Brent rose to above $115 a barrel, while December delivery contracts rose as high as $115.45.

Intraday readings show Brent rising 1.8% to just above $115 per barrel, underscoring the strength of the latest advance.

The latest leg higher in oil prices is closely tied to heightened geopolitical risks in the Middle East. There is widespread speculation that the United States is considering renewed military strikes on Iran after upcoming midterm elections, with some analysts also pointing to the possibility of US-Israeli action against Iranian energy infrastructure. These expectations have emerged after what had been seen as a brief conflict has extended into an eighth month.

Tensions have escalated further after Iran’s Islamic Revolutionary Guards Corps claimed to have struck four commercial ships in the Strait of Hormuz. In parallel, the US State Department has ordered some diplomats and families of US government employees to leave Saudi Arabia, which has faced continued attacks from Houthi rebels in Yemen. These developments have reinforced concerns about potential disruption to oil supplies from a key producing region.

Tehran has also warned that it would attack oil facilities, undersea cables, data centres and AI facilities in the Gulf region if a new US-Israeli offensive is launched against Iran. Such threats directly target critical energy and digital infrastructure, intensifying worries about continuity of supply and contributing to the risk premium embedded in current oil prices.

Rising oil prices are reverberating through global financial markets. Wall Street’s main indices slid at the start of trading, with the Dow (US30:N) Jones Industrial Average falling by about 1% as investors reacted to surging energy costs and volatility in other sectors. Market commentators note that stocks are contending simultaneously with concerns over oil, the sustainability of AI-related spending, and ongoing geopolitical uncertainty.

High crude prices are also putting inflation and interest rate risks back in focus. With Brent above $115 a barrel, analysts warn that cost pressures linked to energy could keep inflation concerns and potential rate hikes "on the front burner." As Brent trades near levels last seen during earlier phases of the Iran conflict and the war in Ukraine, questions are resurfacing over how long central banks can maintain any easing in their policy stance if energy costs remain elevated.

Additional upward pressure on oil and gas prices is being linked to escalating tensions in Ukraine and expectations of increased energy demand as the northern hemisphere moves into the winter months. Together, these factors underscore how geopolitical flashpoints and seasonal consumption patterns are intersecting to drive the latest jump in crude benchmarks.