Oil prices surged on renewed geopolitical tensions centered on Iran, with Brent crude rising 3.9% to $103.08 per barrel and West Texas Intermediate (WTI) gaining 1.8% to $92.16. The rebound followed Iranian President Masoud Pezeshkian’s statement that Tehran would resist U.S. pressure, coming just days after U.S. President Donald Trump warned of further action against Iran. This followed Saudi Arabia’s efforts to restore its East-West crude pipeline, which had been disrupted by drone attacks. The pipeline, critical for Saudi crude exports to bypass the Strait of Hormuz, remains operational but remains vulnerable to further disruptions, adding to market uncertainty over supply stability in the region.
Asian energy stocks outperformed broader markets, with Hong Kong-listed CNOOC rising 2.1% and its Shanghai-listed counterpart climbing 0.7%. Santos gained 1.4%, while Woodside Energy added 1%. Eneos (Japan) rose modestly by 0.3%, though Inpex was the sole outlier, falling 1.3% despite the sector-wide rally. In contrast, U.S. equities underperformed, with the S&P 500 dropping 0.8% and the Nasdaq and Dow Jones Industrial Average each losing 1.1% and 0.7%, respectively. The broader energy sector, however, gained about 1%, reflecting its sensitivity to oil price movements.
The U.S. economy showed signs of resilience, with business activity accelerating to its strongest level in over five years in September. Meanwhile, Treasury yields reached their highest level since 2007, with the 10-year yield at elevated levels. This elevated yields have fueled expectations of a potential Federal Reserve rate hike at its October meeting, adding to market volatility as central bank policy remains a key driver of financial conditions.
The rebound in oil prices followed Saudi Arabia’s efforts to restore its East-West pipeline, which had been disrupted by drone attacks. The pipeline is critical for Saudi crude exports, providing an alternative route to the Red Sea and reducing reliance on the Strait of Hormuz, a narrow waterway that has historically been a flashpoint for geopolitical tensions. The restoration of this pipeline, while not yet fully operational at capacity, has contributed to a temporary stabilization in crude supply dynamics, though ongoing risks persist.
The geopolitical tensions surrounding Iran remain a focal point for markets, with the U.S. and Iran engaged in a prolonged standoff over nuclear capabilities and regional influence. The recent statements from Iranian President Pezeshkian and U.S. President Trump have heightened concerns about potential escalation, driving oil prices higher and reinforcing the view that supply disruptions remain a persistent risk in the region.
