Oil prices remain elevated this week after an Iran-backed drone strike killed three U.S. service members in northern Jordan, adding to supply disruption concerns.

West Texas Intermediate (WTI) crude—one of the main three benchmarks in oil pricing—opened the week higher but pared earlier gains, potentially setting the stage for heightened volatility in energy markets as tensions in the region escalate.

Following the attacks, President Joe Biden said that the United States will hold those responsible to account. RBC Capital said in a research note cited by Reuters that the deaths represent "a critical inflection point in the ongoing conflict in the Middle East and raises a spectre of a more substantial U.S. involvement in the war." The bank added that heightened tensions between Washington and Tehran threatened to cause further regional supply disruptions.

The drone strike last weekend came after Yemen Houthi rebels launched missiles at a fuel tanker last Friday that sparked an onboard fire. Up until this point, attacks by Houthi militants have primarily targeted container vessels transiting the Red Sea. These strikes raised worries that rebels could intensify attacks on oil tankers in coming weeks, further disrupting global energy supplies.

In addition, oil prices remain well supported on the demand side after a better-than-expected reading on U.S. economic growth last week and expectations of Chinese stimulus to curb a slowdown in the world’s largest oil importing nation.

Today (Friday) oil prices have eased and are trading lower on unverified reports that Israel has agreed to a ceasefire proposal. Bloomberg previously reported that talks were progressing towards a deal to temporarily halt the Israel-Gaza conflict and release civilian hostages held by Hamas. If this proves to be the case then the upward momentum we have seen recently in oil prices may show some signs of a reversal.

Fuel card customers can expect an increase in the region of 1.2 pence per litre for next week.

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