US-Iran fighting: Crude hits four-month high above $108 as prolonged conflict sparks supply fears 

Crude oil prices extended their gains in early Asian trading as an escalation of hostilities in West Asia stoked fears of supply disruptions and raised concerns that the conflict between Iran and the US could drag on.

Following an overnight surge of 7% that saw prices cross the $100 per barrel mark, West Texas Intermediate (WTI) traded around $104 a barrel. Meanwhile, Brent Crude pushed past the $108 a barrel level, marking its highest point in four months and setting up its largest weekly advance since July. Both benchmarks achieved their highest closing levels since May 19.

The recent price surge reflects growing market anxiety, with oil advancing more than 18% in September alone. Since the start of the Iran war at the end of February, WTI crude has surged 52.9%, bringing its total gain for the year to 78.5%. The sustained price rally has fueled fears of prolonged inflation, complicating the broader outlook for global interest rates.

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The financial strain is already impacting consumers at the pump. Following record-high Labor Day gas prices, diesel is expected to cross $6 per gallon for the first time in the coming days.

The market shock comes as top White House advisors discussed the possibility of the war continuing past Inauguration Day in January 2029 with President Donald Trump, reported The Wall Street Journal. The assessment stands in contrast to statements made by Trump, who asserted that the conflict was drawing to a close and claimed the war would end immediately after the midterm elections.

Trump also told reporters that oil and gasoline prices would fall after the midterms, alleging that Iran was "desperate to try and affect the election, so that we can get a nice weak group of people in there, and leave them alone and let them have their nuclear weapon."

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The recent spike in prices follows a sharp military escalation following a period of relative calm in August. Iran launched multiple attack attempts against American warships, prompting the US military to destroy at least eight Iranian tankers. Concurrently, Iran's Houthi allies in Yemen struck several energy facilities and targets in Saudi Arabia, injuring over 70 civilians and raising fears of a broader regional conflict.

Market analysts warn that the situation could worsen if logistics remain threatened. Daan Struyven, co-head of global commodities research at Goldman Sachs, noted during an interview on CNBC that the escalation in the US-Iran conflict is raising the risk of oil prices surging above $120 a barrel as attacks on shipping intensify.

US diesel prices officially crossed the $6.00-per-gallon mark for the first time in history, surging 74% over the past nine months as a severe supply shortage grips the nation, according to report by The Kobeissi Letter. The nationwide crunch has hit localised markets even harder, with diesel prices in several states now pushing past $8.00 per gallon. The record spike comes as crude oil hovers near $105 a barrel and the military conflict in Iran continues to intensify, compounding pressure on energy markets and global supply chains.

All focus now shifts to crucial US consumer price index report to be released on September 11, a high-stakes release set to heavily influence the Federal Reserve's September 16 interest-rate decision. Wall Street expects the August data to show consumer prices rising 0.4% month-on-month, pushing the annual inflation rate to 3.4%, according to a Dow Jones survey.