Oil prices near four-year high as US-Iran tensions escalate

Oil prices near four-year high as US-Iran tensions escalate - Fuel pumps. (Photo: Freepik)

The latest rally extends gains of more than 15 per cent in October alone, highlighting the continued pressure on global oil markets as the conflict involving Washington and Tehran shows little sign of easing.

Benchmark oil prices are approaching four-year highs as escalating tensions between the United States and Iran raise fears of renewed military strikes and further disruptions to global energy supplies.

The international benchmark climbed above $113 (Sh14,684.35) per barrel on Friday, moving closer to the four-year high of $116.72 (Sh15,167.76) recorded on October 23, as investors priced in the risk of prolonged instability in the Middle East.

The latest rally extends gains of more than 15 per cent in October alone, highlighting the continued pressure on global oil markets as the conflict involving Washington and Tehran shows little sign of easing.

The current prices represent a sharp departure from levels recorded before the war began on February 28, when Brent crude traded at about $71.32 (Sh9,268.03) per barrel.

This means the benchmark has gained about 58 per cent since the last trading session before the outbreak of hostilities, adding approximately $41.68 (Sh5,416.32) to the cost of a barrel.

The latest increase follows reports that a senior US military commander briefed President Donald Trump on possible options for renewed strikes against Iran, raising concerns that diplomatic efforts could collapse and trigger another escalation.

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Although Tehran confirmed receiving a letter from US Vice President JD Vance aimed at reviving peace negotiations, it has signalled little willingness to soften its position on ending the conflict.

Concerns have also intensified around the Strait of Hormuz following two separate tanker incidents, heightening fears over the security of a critical shipping route through which a substantial share of the world's oil supplies passes.

Meanwhile, tensions have spread beyond the Middle East, with Ukrainian forces reportedly striking a Russian refinery in the Samara region as Moscow launched another overnight attack against Ukraine.

The developments have reinforced concerns over the security of global energy supplies, with traders remaining sensitive to any military escalation that could threaten production, transportation and exports.

For oil-importing economies such as Kenya, sustained increases in international crude prices could translate into higher import bills, putting additional pressure on foreign exchange demand and domestic fuel prices.

The rally also threatens to sustain inflationary pressures through higher transportation, manufacturing and distribution costs, potentially worsening the cost of living for households.