Oil Tops $117 as Fears of Wider Middle East War Reignite Inflation Anxiety

Brent hits highest since April

April-delivery crude for next year trades above $100

Strike on key facilities could send oil to $150

Global oil prices climbed above $117 a barrel as fears grew that fighting involving the U.S. and Iran could escalate again. Rising concern over supply disruptions, and the prospect that high energy prices could persist, are reviving inflation jitters across financial markets.

Brent crude futures, the global benchmark, rose as much as 3.8% to $117.45 a barrel in New York trading on October 23, the highest since April, the Financial Times reported. The contract later pared some gains to settle at $116.72. It is up more than 10% this month.

Markets are closely watching the risk of a broader conflict around the U.S. midterm elections in November. Fears that the U.S. and Israel could widen attacks on Iran have coincided with shrinking global oil inventories. Iran's state broadcaster claimed a day earlier that seven tankers passing through the Strait of Hormuz had either come under attack or struck mines. The U.S. also withdrew some diplomatic personnel and family members from the region as attacks by Yemen's Houthi rebels on Saudi Arabia increased.

Expectations for a quick end to the war are fading. President Donald Trump said on October 23 that he could end the war "very quickly." But Mike Waltz, the U.S. ambassador to the United Nations, told the FT the stalemate could last another year. Helima Croft, global head of commodity strategy at RBC Capital Markets, said talk of a near-term end could not offset actual missile strikes.

The focus of supply concerns is shifting from shipping disruptions to damage at production facilities. Even if crude continues to move through the Strait of Hormuz, supply would be hard to maintain if oil fields, refineries and export facilities came under attack. Ole Hansen, head of commodity strategy at Saxo Bank, said further strikes on critical facilities could create disruptions that cannot be resolved simply by rerouting shipments.

The futures market is also reflecting expectations that high oil prices will persist. Brent contracts for delivery in April next year also traded above $100 a barrel. That suggests traders see little chance of a quick return to price stability even if the immediate supply shock eases.

The prospect of a further jump in crude prices is also coming into view. Bob McNally, president of Rapidan Energy, said oil could quickly climb to around $150 a barrel if the war intensifies and causes major damage to key petroleum facilities.

The surge in energy prices is feeding through to inflation and interest-rate concerns. The U.S. five-year breakeven inflation rate, a market measure of expected inflation over that period, rose 0.08 percentage point to 2.47% on October 23. The yield on the 10-year Treasury also rose 0.03 percentage point to 4.99%, reversing part of the previous day's decline.

Stocks were not spared. The S&P 500 fell 0.5% on October 23 after dropping 1.2% a day earlier. The market had already been under pressure from the cost of artificial-intelligence investment, and rising oil prices added another inflation worry.