The price of oil stabilized above $90 per barrel after escalating tensions in the Middle East led to a radical repricing of geopolitical risks.

Fears are rising of a broader conflict in the region, with Israel’s increasing preparations for an attack by Iran in response to its targeting of the country’s diplomatic compound in Syria.

“The market now knows that some kind of retaliation from Iran is likely to occur – but it does not know when, where or what it will be – and this is creating great discomfort and tension,” said Bjarne Schildrup, senior commodities analyst at SEB AB.

The prices of both the global standard Brent crude oil and the US West Texas Intermediate crude oil rose for the sixth consecutive session. Heightened tensions have also stimulated activity in the oil options market, with volatility rising and bullish options trading at a rare premium to their bearish counterparts.

Oil prices rose by more than 20% this year

Oil prices have risen more than 20% this year, as geopolitical concerns in the Middle East supported a market experiencing supply constraints and stronger-than-expected demand.

The conflict between Israel and Hamas led to the Houthis attacking shipping lanes in the Red Sea, which raised transportation costs, but it should be noted that the matter has not yet escalated into a broader war in a region that represents about a third of the world’s supplies. Talks for a truce between Israel and Hamas – which could see the release of hostages held in Gaza – remain stalled.

Earlier this week, the OPEC+ alliance maintained supply cuts for the first half of the year, meaning production restrictions will continue at nearly two million barrels per day. The impact of these cuts was exacerbated by Mexico’s decision to curb some oil exports, which will lead to a further decline in supplies entering the market. But the Mexican president played down those concerns on Thursday.