Oil prices hit a two-month high on Wednesday as concerns over further supply disruptions grew after U.S. forces launched strikes on Iranian military targets for an 11th consecutive night, while Kuwait said it was dealing with attacks by Iranian drones.

Brent crude prices crossed the mark of $92 a barrel, rising to the levels last seen in early-June. West Texas Intermediate (WTI), the US crude, is now trading near the mark of $85 a barrel, climbing for the fourth straight session.

The latest move followed a sharp rise in oil prices on Tuesday, when crude settled at a five-week high after U.S. forces hit targets in southern and western Iran. Iran, meanwhile, attacked U.S. facilities in Bahrain, Kuwait and Jordan.

The U.S. military said its latest strikes began late Tuesday in the United States, or early Wednesday in Iran. The attacks came shortly after Kuwait's army said its air defence systems were intercepting Iranian drones.

The continuing exchange of attacks has heightened concerns over global energy supplies. Yemen's Iran-aligned Houthis have also added to those worries by threatening to target vessels carrying Saudi oil through the Bab el-Mandeb Strait and announcing a naval blockade of Saudi Arabia. The Bab el-Mandeb, located at the southern entrance to the Red Sea, has become an increasingly important route for Saudi crude exports as traffic through the Strait of Hormuz has dropped sharply since a ceasefire between the U.S. and Iran broke down earlier this month.

Big crude surge ahead?

Goldman Sachs has warned that Brent crude could climb to $120 a barrel if disruptions through the Strait of Hormuz, the world's most important oil transit route, continue. Its base case, however, assumes that tensions in the Middle East will eventually ease. The Wall Street bank expects Brent crude to average $80 a barrel in the fourth quarter and $75 next year if tensions in the region subside.

However, analysts said the risks to those forecasts remain "tilted to the upside", citing the possibility of disruptions to shipping through the Strait of Hormuz and potentially the Red Sea. Energy markets have seen renewed volatility this month, with Brent moving back above $91 a barrel as fighting between the U.S. and Iran intensified and Iran-backed Houthi rebels in Yemen threatened to block Saudi shipments. Red Sea routes have become increasingly important in helping Persian Gulf crude cargoes affected by disruptions reach buyers. 

"At the current point there are no signs of a ceasefire again. But in case there is a ceasefire immediately imposed, we don't expect Brent oil prices to fall beyond $70 per barrel. It is likely to remain the lower support for the near term," Pranav Mer, Senior Vice President, Currency and Commodity at JM Financial, told ETMarkets. Anindya Banerjee, Head of Commodity Research at Kotak Securities, said crude oil has once again started reflecting geopolitical risks. "Any strike on major Gulf export infrastructure could force a retest of $95-100 and beyond," he said.

Banerjee said the market is now responding less to the military strikes themselves and more to the weakening prospects for diplomacy. Tehran has set new conditions for restarting negotiations, he said, with each fresh development delaying the return of normal tanker traffic through the Strait of Hormuz, where movement has already remained well below pre-war levels.

– with Agencies inputs --