Why Oil Prices Are Poised to Spike Following U.S. Strikes on Iran: What You Need to Know

Oil prices are set to rise when trading resumes this Sunday after the U.S. bombed Iranian nuclear facilities. This attack heightens the chances that Iran may retaliate, possibly by targeting energy infrastructure or shipping routes in the Strait of Hormuz.

Analysts predict prices will open higher, depending on how Iran reacts. Jorge León, from Rystad Energy, noted that this bombing represents a significant escalation, marking the first direct attack by the U.S. on Iranian soil. He stated, “If Iran strikes back directly, we could see oil prices surge.”

In the last week, oil prices surged nearly 10% due to rising tensions. Brent crude, a global benchmark, reached nearly $80 a barrel but closed at around $77 by Friday. The combination of market uncertainty and geopolitical risks tends to push prices up.

The impact of U.S. action has introduced a new level of unpredictability. Traders are keenly awaiting Iran’s next move. With global oil markets closed over the weekend, they will open at 11 PM UK time on Sunday.

U.S. President Joe Biden has warned of further actions if Iran doesn’t seek peace. Iranian hardliners, meanwhile, have called for retaliatory measures, including attacks on the U.S. Navy in the Gulf.

The Strait of Hormuz is vital for global oil supply. Approximately one-third of the world’s seaborne oil passes through it daily. Any disruption here would lead to even higher energy prices. While Iran has previously claimed it could block the strait, experts believe such an attempt would be challenging.

Another possibility is Iran targeting oilfields in allied countries, such as Saudi Arabia or Qatar. These nations are worried about escalating conflict and have been calling for an end to hostilities. On Sunday, Qatar’s foreign ministry issued a warning about the potential catastrophic repercussions of rising tensions.

Experts at S&P Global Commodity Insights expect prices to rise on Sunday but may stabilize by Monday if Iran doesn’t respond immediately. They highlight key questions for the near future: Will Iran attack U.S. interests? Will Iranian crude exports stop? How will shipping in the Strait of Hormuz be affected?

Iran currently exports about 2 million barrels of oil daily, while around 21 million barrels from Iran and its neighbors pass through the Strait. Despite potential disruptions, increased production from OPEC+ and strong global inventories could ensure enough supply, as long as the Strait remains open.

In summary, the situation remains fluid. Geopolitical tensions will continue to shape oil prices, and all eyes will be on Iran’s response in the coming days. For further insights on global oil markets, you might find the U.S. Energy Information Administration helpful.

Source link