Oil prices jump on Middle East conflict risk

That combination matters because the market is no longer focused only on how much oil is being produced, but on how safely it can move. Transport costs for crude from the Gulf to China have jumped to near-record levels, equal to about 25% of the value of a barrel versus roughly 5% in normal times, according to Kpler, a burden that can add about $75 million in freight costs to a two-million-barrel cargo.

The strain is also showing up in refined fuels and gas. Europe’s TTF benchmark has risen to its highest since 2022 as weak LNG deliveries from the Gulf, a recent attack on a tanker off Yemen and low storage levels tighten the market, while damage to Middle East refineries is limiting gasoline and diesel output. Kpler says a return to prewar refining capacity may not come until the second quarter of 2027.

For investors, the immediate winners are oil producers and tanker owners, while refiners, airlines, shippers and consumer-facing companies face higher input costs and margin pressure. In U.S. markets, the move also reinforces the inflation risk that keeps pressure on bond yields and central banks, with the 10-year Treasury yield hovering around 5%.

Oil-linked equities and energy ETFs have already been trading with elevated momentum, while conventional technical indicators on USO show the fund well above its 50-day and 200-day moving averages and deep in overbought territory on RSI readings. The next catalyst is whether the conflict widens further or whether diplomatic efforts and any supply response from the region cool the risk premium.