Global oil prices jumped by more than $1 a barrel on Wednesday (March 4) as military escalations between the U.S.-Israel coalition and Iran severely disrupted Middle East production and halted key export routes.

According to a report by Reuters, Brent crude rose by $1.11, or 1.4%, to reach $82.53 per barrel—its highest level since January 2025.

Simultaneously, U.S. West Texas Intermediate (WTI) crude increased by 79 cents, or 1.1%, to stand at $75.37.

The price spike follows strikes by Israeli and U.S. forces on Tuesday targeting various sites across Iran. These strikes reportedly damaged critical energy infrastructure in a region responsible for nearly one-third of global oil production.

Iraq Halts Half of Its Production
The supply crunch has been exacerbated by Iraq, the second-largest producer in OPEC.

Officials told Reuters that Iraq has been forced to slash production by approximately 1.5 million barrels per day (bpd)—roughly half of its total output—due to storage limitations and the closure of export routes.

Analysts warn that if exports do not resume shortly, production losses could escalate to 3 million bpd within days.

Standoff at the Strait of Hormuz
The Strait of Hormuz, a vital artery through which one-fifth of the world’s oil and liquefied natural gas (LNG) flows, remains effectively closed for a fourth consecutive day following attacks on five tankers.

In response to the maritime crisis:

• President Donald Trump announced that the U.S. Navy is prepared to escort oil tankers through the Strait to stabilize prices.
• The President has directed the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf region.

Despite these measures, shipowners and market analysts remain skeptical. "Will military escorts and insurance be enough to restore global market confidence?" questioned one industry expert, as countries like India and Indonesia begin a frantic search for alternative energy sources.

Strategic Shifts and Rising U.S. Inventory
In an effort to bypass the volatile Strait, the Saudi oil giant Aramco is reportedly attempting to reroute some exports through the Red Sea.

Meanwhile, some Chinese refineries have temporarily shut down for maintenance amid the supply uncertainty.

On the domestic front, the American Petroleum Institute (API) reported that U.S. crude inventories rose by 5.6 million barrels last week, significantly higher than the 2.3 million barrels predicted by analysts. Official government data is expected to be released later today.