Oil prices extend gain for fourth day, stay beyond $85 amid Middle East chaos

Oil prices continued their upward trend for a fourth straight day, with Brent crude holding above $85 a barrel on Thursday. Investors are reacting to a significant escalation in the conflict between the United States and Iran, fueling concerns over the stability of crucial global energy shipping lanes.

Brent crude traded at $85.48 a barrel, while U.S. West Texas Intermediate (WTI) rose to $80.27. These gains follow previous sessions' increases and bring the benchmarks near one-month highs. The latest advance occurred after the U.S. conducted strikes on Iranian missile sites and coastal defense positions, following a naval blockade on Iranian ports. Iran has characterized the situation as an "existential war" with the U.S. and has warned of potential disruptions to regional energy exports.

The renewed hostilities have heightened worries about crude supplies transiting the Strait of Hormuz, a vital waterway that previously handled about one-fifth of global oil and natural gas trade. Analysts also point to the potential for further disruptions, as Iran has indicated it could leverage its Houthi allies in Yemen to target the Bab el-Mandeb strait, a critical gateway to the Red Sea.

"With tensions in the Middle East flaring up again, buying is taking the lead," said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment. He noted that while a full-scale war is considered unlikely, WTI could still climb to $85–$87 depending on the conflict's evolution. Investment bank Goldman Sachs offered a wider outlook, suggesting Brent crude could surge above $110 in the fourth quarter if Gulf export flows face delays. Conversely, prices might drop into the $60s by year-end if geopolitical tensions ease and oil production recovers more rapidly than anticipated.

The rising oil prices are also impacting fuel-dependent industries. United Airlines anticipates nearly $6 billion in additional fuel costs this year, a significant increase from its earlier projections. Despite this, the airline raised the lower end of its annual profit forecast, citing strong travel demand, higher ticket prices, and capacity reductions as factors expected to offset the impact of increased fuel expenses. Meanwhile, U.S. crude stockpiles saw a decline of 1.7 million barrels in the week to July 10, according to the U.S. Energy Information Administration, falling short of analysts' expectations.

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With tensions in the Middle East flaring up again, buying is taking the lead