Oil Prices Surge as US-Israel Strikes on Iran Escalate Middle East Tensions

Brent crude jumped 10 percent to about $80 a barrel in over-the-counter trading on Sunday, according to oil traders, while analysts predict prices could climb as high as $100 following US and Israeli strikes on Iran. The strikes have plunged the Middle East into a new period of heightened conflict and uncertainty.

Growing Concerns Over Strait of Hormuz

The global oil benchmark reached $72.87 a barrel on Friday, its highest level since July, driven by growing concerns over potential attacks that materialized shortly after. A key factor driving price increases is the potential closure of the Strait of Hormuz, a critical waterway for global oil supplies.

Most tanker owners, oil majors, and trading houses have suspended crude oil, fuel, and liquefied natural gas shipments via the Strait of Hormuz after Tehran warned ships against passage through the waterway. More than 20% of global oil passes through the Strait of Hormuz The Guardian.

Price Predictions and OPEC+ Response

Middle East leaders have cautioned Washington that a war with Iran could push oil prices above $100 a barrel The Guardian. Rabobank analysts anticipate prices will remain above $90 a barrel in the near term.

The OPEC+ group of oil producers agreed on Sunday to raise output by 206,000 barrels per day (bpd) from April, a modest increase representing less than 0.2% of global demand CNN.

Potential Supply Disruptions

Even with alternate infrastructure, the closure of the Strait of Hormuz could result in a loss of 8 million to 10 million barrels per day (bpd) of crude oil supply, even after diverting some flows through Saudi Arabia’s East-West pipeline and Abu Dhabi’s pipeline The Guardian. Rystad Energy economists expect prices to rise by $20 to approximately $92 a barrel when trade resumes The Guardian.

Asian Markets React and Seek Alternatives

The crisis in Iran has prompted Asian governments and refiners to assess oil stockpiles and explore alternative shipping routes and supplies. Kpler analysts suggest India might turn to Russian oil to offset potential supply losses from the Middle East The Guardian.

Current Oil Prices

As of Friday, Brent crude, the global benchmark, rose 2.9% to $72.87 a barrel CNN and futures on West Texas Intermediate (WTI) crude rose 2.8% to trade above $67 Yahoo Finance.