ASX energy stocks are trading more than 2.5% higher today after a 3% climb in oil prices yesterday in response to Iran firing ballistic missiles at Israel in retaliation for Israel's campaign against Tehran's Hezbollah allies in Lebanon.
Brent crude futures rose by 2.6% to close at US$73.56 per barrel, while US West Texas Intermediate (WTI) climbed by 2.4% to settle at US$69.83 per barrel.
Earlier in the session, both benchmarks had surged by more than 5%, reflecting market concerns over supply disruptions.
Political risk analyst Clay Seigle highlighted that Israel might expand its military campaign to target Iran directly, potentially affecting Iranian oil production.
"Iran's oil assets are very likely on the target list," Seigle said, suggesting that a disruption of more than a million barrels per day could be on the horizon.
Compounding tensions, Yemen's Iran-backed Houthi rebels claimed responsibility for attacks on international vessels in the Red Sea, further raising concerns about supply chain vulnerabilities.
Analysts, such as Tamas Varga from brokerage firm PVM, warned of potential attacks on oil producers like Saudi Arabia, heightening fears of broader impacts on the global oil supply.
The oil market had been trading lower before the missile attack news, weighed down by expectations of increased supplies. However, the escalating Middle East conflict reversed this trend.
Meanwhile, OPEC+ ministers are set to meet today, with no significant policy changes expected ahead of a planned production increase in December.