Oil prices climbed above $100 a barrel for the first time since July as escalating tensions and attacks on oil infrastructure in the Middle East further disrupted an already fragile supply chain. Early Wednesday, Brent crude, the international pricing benchmark, surged nearly 3% to reach $100.72 per barrel. Meanwhile, U.S. benchmark crude rose 2.4% to trade at $95.25 a barrel.

The rise in crude prices contributed to a notable increase in gasoline and diesel costs. According to AAA, the average price for a gallon of regular gasoline rose by 7 cents overnight, reaching $4.22—more than a dollar higher than the same period last year. Diesel prices, which significantly influence the cost of shipping and production, hit a record high last Friday and continue to climb, with the average price per gallon reaching $5.94, a 9-cent increase since Friday. Elevated jet fuel costs have already prompted both U.S. and international airlines to reduce flights and implement higher fares and fees.

The market reaction followed a series of incidents in the region, including U.S. military strikes on five Iranian tankers in retaliation for missile attacks on a Navy warship, and attacks by the Iranian-backed Houthi rebel group that ignited fires at Saudi Arabian oil facilities. These developments have intensified the disruption of oil exports, notably through the Strait of Hormuz, a strategic waterway that previously accounted for about 20% of global oil shipments before the outbreak of conflict more than six months ago.

Since the escalation of hostilities involving Israel, the United States, and Iran, oil prices have shown significant volatility. Brent crude traded between roughly $70 and $100 per barrel during March to May, with swings between $72 and $102 in July, influenced by fluctuating prospects for a negotiated agreement that would enable safer passage of tankers in the Persian Gulf.

Bank of America analysts commented that a lasting deal to stabilize shipping lanes before the upcoming U.S. midterm elections appears increasingly unlikely. Their revised price forecast anticipates a second-half average of $83 per barrel, assuming gradual resumption of shipping through the Strait of Hormuz. However, they warned that ongoing attacks could drive prices to a range of $95 to $120 per barrel, with potential spikes to $150 if major energy infrastructure sustains damage.

Negotiations between the U.S. and Iran have stalled primarily over control of the Strait of Hormuz. Iran asserts sovereign rights to regulate passage and impose fees on vessels transiting the waterway off its coast, while the U.S. insists on unrestricted passage, enforcing a naval blockade against Iranian ports and tankers.

Adding to supply concerns, intensified Houthi strikes in Yemen have targeted alternative shipping routes used by Saudi Arabia to transport oil amid the conflict, constraining global supply further.

Rising energy costs have burdened consumers, businesses, and economies worldwide, particularly outside the United States. Factors such as refinery outages in Russia, reduced refining capacity elsewhere, and shrinking inventories have amplified the upward pressure on diesel and gasoline prices, according to Bank of America. The ongoing increase in fuel costs is expected to have significant economic and political implications, including potential effects on voter sentiment ahead of the U.S. midterm elections, scheduled in about eight weeks.