In the wake of the U.S. dropping bunker buster bombs on Iran’s key nuclear sites, energy markets are preparing for potential disruptions and a further surge in oil prices.
What Happened: The US’s aggressive actions against Iran, a significant oil producer, have heightened tensions in the region. This conflict, initially sparked by Israel’s extensive airstrikes, has thrust the global energy trade into the limelight.
Energy analytics firm Kpler, through a post on X on Saturday, forecasts a sharp 7-10% increase in oil prices due to rising risk premiums. However, they also warn that this spike may be temporary.
“Expect oil to open with a sharp 7–10% gap up as risk premiums surge. But don't be fooled, this may not last,” stated Kpler.
A 10% increase from Friday’s crude oil closing would push the global oil benchmark to nearly $85 per barrel.
Despite the potential for Iran to retaliate, Kpler believes that a complete shutdown of the Strait of Hormuz or attacks on the Gulf Cooperation Council‘s energy infrastructure are highly unlikely.
Kpler also anticipates an early OPEC+ production increase of at least 411,000 barrels per day in August, continuing a trend of similar output hikes in recent months.
Freight disruptions are a key concern as Houthi threats escalate in the Middle East Gulf and Red Sea, potentially boosting demand for middle distillates—especially jet fuel—in Western markets, predicts the energy analytics firm.
“Freight disruptions will be the story to watch,” stated Kpler
Why It Matters: The recent escalation in the Middle East has been a cause for concern for the global energy trade. Last week, Shell CEO Wael Sawan warned of the potential repercussions on global trade if the conflict between Israel and Iran continues to escalate. The strategic importance of the Strait of Hormuz, a major artery for the world’s oil trade, has been a key concern.
Notably, Iran’s parliament has approved a measure to close the Strait of Hormuz. However, the move still awaits approval from security officials. The Strait of Hormuz is a crucial chokepoint for global trade, carrying 21% of the world's petroleum liquids consumption.
The Israel-Iran conflict has already had a significant impact on oil prices, with a more than 3% rise in West Texas Intermediate crude prices to above $77 a barrel. The potential for U.S. involvement in the conflict has further increased the geopolitical risk premium, leading to a surge in interest in oil and energy-themed ETFs.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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