Crude oil prices surge 14% to above $85/barrel in two days; what's driving the rally?

Crude oil prices in the global market surged 14% to more than $85 per barrel (bbl) within two days as investors focused on the rising risk of another supply chain disruption due to the recent escalations between the United States and Iran amid the absence of a final peace agreement.

Investing.com data showed that the benchmark Brent crude oil prices surged nearly 14% to a high of $85.66 per bbl since the commodity markets re-opened this week, starting Monday, July 13.

Latest updates from the West Asian front showed that the United States have continued its attacks against Iran, while US President Donald Trump informed Congress that “limited” military action against Iran has resumed.

Investors are focused on monitoring escalations between the United States and Iran, as continued further escalations between the countries pose the risk of disruption of oil trade via the Strait of Hormuz. Recent reports also indicate that Iran has closed the key trading route amid the attacks from America.

Oil prices today

At 10:15 am (IST), the Brent crude oil prices were trading 1.94% higher at $84.89 per bbl on Tuesday’s market, compared to $83.3 per bbl at the previous commodity market close, according to Investing.com data.

The exchange data also showed that although the crude oil prices have spiked up recently, the overall energy prices were down 6.6% in the last one-month period, and were trading 10% lower on a last three-month basis.

In the past six months, crude oil prices have gained over 27% in the global market.

While the US-based West Texas Intermediate (WTI) crude oil prices were trading 2.12% higher at $79.79 per bbl on July 14, compared to $78.14 per bbl at the previous market close, according to the exchange data.

What's driving the oil price rally?

Oil prices surged 14% in two days against the backdrop of the continued attacks from the United States on several targets in Iran in an effort to destroy key military targets in the West Asian country.

Since the retaliatory actions started, the United States have launched a total of five rounds of attacks against Iran as of Monday, July 13, as more than 50,000 American military personnel have been deployed in West Asia.

On Monday evening, US Central Command (CENTCOM) disclosed that its military forces have carried out the latest round of attacks against Iran at 10:15 pm (ET), executing a five-hour-long mission to destroy strategic targets.

“During the five-hour mission, U.S. forces successfully struck military targets across Iran including Bushehr, Chah Bahar, Jask, Konarak, Abu Musa, and Bandar Abbas, to further degrade Iran's ability to attack commercial shipping,” said CENTCOM in an official statement.

The US forces attacked Iranian coastal defence systems, missile and drone sites, and maritime capabilities.

According to the latest report from CNN, US President Donald Trump has also informed the US Congress that the military has started action against Iran, highlighting that this is a “limited” and focused action to degrade the West Asian country’s military capabilities.

“These strikes are limited, measured, planned, and executed in a manner designed to minimise civilian casualties,” said Trump, according to the report.

An Al Jazeera report suggests that Iran’s Revolutionary Guards have carried out attacks against American forces and their key facilities and locations in Jordan.

These attacks from both sides are emerging after last week Trump said that the ceasefire was “over” and that he no longer wants to negotiate with the country in pursuit of diplomacy.