US strikes on Iran over the weekend have added to risks for global oil supply, which has so far been unaffected by some of the most extreme military actions in the Middle East in years.
Brent crude jumped early on Monday to trade above US$80 ($103.16) a barrel for the first time since mid-January after US President Donald Trump said air attacks had “obliterated” Iran’s three main nuclear sites.
It then pared gains, as the vital Strait of Hormuz remains open to tankers.
Analysts are now trying to weigh the increased geopolitical risk against previous fears that strong production and a lukewarm global economy could result in a supply glut.
Here’s what oil watchers are saying:
Rapidan Energy Group
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Iran will likely be very cautious about disrupting Hormuz, the narrow passage separating Iran and the Arabian peninsula through which about 25% of the world’s oil and 20% of global liquefied natural gas must pass, said Bob McNally, president and founder of Rapidan Energy Group and a former White House energy official.
“Traders are holding their breath, waiting to see if Israel or Iran expand this conflict beyond military and political targets into traded energy,” McNally said on Bloomberg TV. “So far, no one has pulled that trigger. And if they don’t, I can see the price reversing.”
Kpler
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Iran has other options for retaliation, including using its regional proxies to disrupt global trade flows more indirectly, according to Kpler senior crude analyst Muyu Xu .
That’s what happened after Israel’s invasion of the Gaza strip in 2023, when Houthi rebels in Yemen began attacking ships in the Red Sea. A direct move to disrupt Middle East oil flows would have severe consequences for prices, she said.
“If Iran blocks the Strait of Hormuz, even for one day, oil can temporarily hit US$120 or even US$150 a barrel,” she said. “And if it attacks major oil production or export facilities in neighboring countries, it may drive up prices higher for longer.”
Vanda Insights
Oil markets have been incredibly choppy since Israel began strikes on Iranian nuclear infrastructure earlier this month, with some trading sessions beginning with price spikes before they retreated into daily losses.
Traders need to look past the surprise of the news and analyse whether the underlying risks have actually changed, said Vandana Hari, founder of consultancy Vanda Insights.
“Beyond the knee-jerk reaction to the shock US attacks, the market needs to assess if the risk of the worst-case supply disruption scenarios has risen,” Hari said. “I don’t see a material increase.”
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Onyx Commodities
Long-time oil market hand Harry Tchilinguirian said he’s particularly watching whether Iran risks pulling the US deeper into the conflict by responding with strikes on US military assets or energy infrastructure in the region, which could drive prices higher. If the response is confined to Israel, that could reduce fears of escalation.
“Basically, the ball is now in Iran’s court to respond, and while it says all options are on the table, some are more consequential than others,” said Tchilinguirian, head of oil research and analytics for Onyx Commodities.
Sparta Commodities
It’s not just crude oil that faces risk. The Strait of Hormuz is also a major chokepoint for LNG and refined products including diesel and jet fuel.
Some fuel markets may see the biggest price responses to the latest development, said June Goh, senior oil market analyst with Sparta Commodities.
“Diesel and jet fuel supply chains are most exposed to the Middle East as oil from the Arab Gulf and the West Coast of India flows through the Straits of Hormuz to feed the main demand hub in Europe,” Goh said. “The east-west spread for middle distillates is expected to widen further to incentivise barrels to flow into Western markets.”
