Global oil prices rallied sharply July 29 as renewed military escalation in the Middle East ended several days of relative calm and revived concerns over crude flows from the region. Brent crude surged 7% to above $90/bbl, while US WTI climbed above $84/bbl.
The rally followed joint US-Saudi airstrikes on Iran-backed militias in Iraq—which killed at least 20 fighters, according to Iraq's Popular Mobilization Forces—and a retaliatory Iranian missile barrage targeting US forces in the region.
This operation marks the first time Saudi Arabia has publicly acknowledged a combat role in the conflict. Washington and Riyadh stated that the strikes were launched in response to drone attacks on oil facilities in Saudi Arabia’s Eastern Province—attacks that originated from within Iraq.
The sudden escalation across multiple fronts has raised concerns that the 5-month-old conflict could expand further, threatening critical shipping lanes—the Strait of Hormuz and, following the Houthis' declared blockade of Saudi shipping, the Bab el-Mandeb strait.
Adding support to prices, US commercial crude inventories fell by 7.2 million bbl in the week ended July 24, according to US Energy Information Administration (EIA) data released July 29. The draw brought commercial stockpiles to 404.5 million bbl, about 7% below the 5-year average for this time of year. The tighter US supply outlook provided additional momentum to the geopolitical risk premium.
