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Futures for both West Texas Intermediate and Brent crude are rising by more than 3 per cent today, trading above 91.5 and 104 dollars per barrel, respectively.

The renewed surge in oil prices reflects mounting fears of a return of disruptions to crude supplies from the Middle East, despite the steady recovery. The risks of multi-front escalation in the region and the war heading towards further fragmentation are boosting the risk premium in pricing, alongside the direct impact of natural seasonal factors in the United States, which worsen the risk of widespread supply loss.

The market appears to be pricing in the risk of renewed supply loss more than the current disruption itself. Nothing suggests a possible return to diplomacy; rather, all signs point to the situation in the region heading towards further deterioration at existing flashpoints and expanding into new ones.

On the Yemen front, the Houthis targeted King Khalid International Airport in Saudi Arabia, resulting in fatalities, following a series of attacks on airports and military infrastructure, in addition to targeting a refinery in Rabigh.

The Strait of Hormuz is also deteriorating again despite the continued flow of crude exports. Reuters reported that the past week saw the largest wave of tanker targeting since the start of the war, with 12 attacks. This led to a drop in the pace of ship transits through the strait to the lowest level in two months, with only seven ships crossing the strait on Tuesday, the lowest level recorded since July, according to data cited by Reuters from the Kpler platform in another report.

As the scope of escalation expands and drags on, Syria may be drawn directly into this conflict, heightening the risk of disruptions at alternative export points for crude and its derivatives in the region. Two nearly simultaneous reports yesterday from Reuters and Axios, citing multiple sources, said Saudi Arabia and Syria were considering Syria sending ground troops to bolster the counteroffensive by internationally recognised government forces supported by the Kingdom against Houthi-controlled points. Axios reported, citing a source, that Syria could send between 10,000 and 20,000 troops to Yemen.

Involving Syria in this war, if it happens, which is highly likely according to Axios, could reinforce the sectarian nature of this regional war and push it further from a diplomatic settlement, strengthening the narrative of military resolution among all parties. Furthermore, Syria has become a transit point for exports in the region, particularly for Iraq, amid prospects of expanding this cooperation to include crude oil exports as well. According to data reported by The New Arab, Iraqi transit exports through Syria reached 5.91 million barrels of fuel oil in August. This expansion of the conflict could add more export points to the list of targets in this war, deepening supply disruptions even if the volumes exported through Syria are relatively small.

All this complexity comes as the midterm elections in the United States and the parliamentary elections in Israel draw near. Thus, we may see the unannounced strategic truce drawing to a close, paving the way for an expanded return to regional war in the second half of next November. Previous reports of a military buildup in the region reinforce this narrative.

Without a return to diplomacy and concessions on key outstanding issues, we may see only prospects for escalation, constantly threatening to deepen structural damage to crude and natural gas production and export facilities in the region. The earlier targeting of the East West pipeline in the Kingdom serves as a miniature example of the consequences of this war dragging on without a settlement, something that could recur repeatedly and on an expanded scale once the prevailing grey state represented by the no-war, no-peace situation ends.

Furthermore, seasonal factors add temporary pressure on prices. The Wall Street Journal reported, citing the National Hurricane Centre, that Tropical Storm Isaias formed in the Gulf of Mexico and is expected to become a hurricane and make landfall along the US Gulf Coast late Friday. The US Bureau of Safety and Environmental Enforcement announced on Wednesday that eight platforms and two rigs were evacuated, shutting in the production and transport of 511,619 barrels of oil per day.

Samer Hasn is Senior Market Analyst at XS.com.