Global oil prices surged in the early hours of trading yesterday after reports of a US-led airstrike resulted in the deaths of top Iranian military officials. Prices soared close to 4 percent amid increasing concerns of possible full-blow war in the region; a conflict that could severely disrupt oil supplies.
Brent crude futures had surged by 3.98 percent to $68.90 per barrel, its highest level since September of last year. Oil prices ended the trading day at $68.21, which represents a 3 percent increase. Meanwhile, US West Texas Intermediate (WTI) futures ended with a 2.8 percent increase to $62.86 per barrel after hitting a high of $63.84 during intraday trading.
Analysts have pointed out that the elevated supply-side risks have managed to raise valid concerns over the stability of supply in the region. The increasing tensions between the United States and Iran-backed militia in Iraq could worsen in the coming weeks, further elevating oil prices.
According to the Iraqi military, the airstrike that hit the Baghdad International Airport early on Friday managed to kill the head of the elite Quds Force, Iranian Major-General Qassem Soleimani. The strike also managed to kill Iraqi militia commander Abu Mahdi al-Muhandis.
The deputy commander of the Iran-backed Popular Mobilization Forces militia was reportedly on his way to the airport to meet with Soleimani accompanied by a military convoy. The leader of Iran's Revolutionary Guard arrived on a plane at the airport. The strike reportedly occurred when the two met on the tarmac, instantly killing the two military officials and all of their companions.
The deaths of the two military officials mark a dramatic escalation in the conflict between Iran and the United States-backed forces. Following the strike, Iranian Supreme Leader Ayatollah Ali Khamenei stated that he is determined to deliver harsh revenge to the perpetrators of the attack.
The airstrike was launched just days after Iran-backed militias had attacked the US embassy in Baghdad. Following the two-day embassy attack, US President Donald Trump ordered the deployment of more than 750 soldiers to the Middle East.
While both nations have previously been holding a so-called "shadow war" against each other, the recent turn of events could potentially result in a full-blown shooting war.
If the two nations and their allies do decide to trade blows in Iraq, it would dramatically affect the oil supply lines and routes in the area. Iraq is currently the second-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC). The country's exports around 3.4 million barrels of oil per day.
