Oil prices surged on Tuesday amid escalating tensions in the Middle East, triggering concerns about global energy security. The international crude oil market witnessed a sharp uptick as investors reacted to the ongoing standoff between Iran and Israel.
The June contract of Brent on the Intercontinental Exchange climbed to $90.57 a barrel, marking a 0.52% increase from its previous close. Similarly, the May contract of West Texas Intermediate on the NYMEX rose by 0.59% to $85.91 a barrel.
Analysts pointed to the recent missile attack by Iran on Israel as a key driver behind the price hike. While initial fears of widespread damage eased following the attack, the event underscored the fragility of the geopolitical situation in the region.
The strength of the US dollar also played a role in shaping market dynamics, with the dollar index reaching five-month highs. This development limited the upward movement of global commodities, including oil. However, comments from Israeli military officials hinting at possible retaliation against Iran provided some support for oil prices.
Moody's Analytics released a note projecting that oil prices could climb by an additional $5 a barrel to $95 and potentially breach the $100 mark if the conflict escalates further.
In response to the surging crude prices, the Indian government announced an increase in the windfall tax on the sale of domestic crude oil to ₹9,600 a tonne, effective from Tuesday. The move aims to capture a portion of the windfall profits garnered by oil exploration and production companies amid the escalating price environment.