Oil jumps 10% on Iran conflict and could spike to $100 a barrel, analysts say

Brent crude oil prices surged by 10% to around $80 a barrel on Sunday, according to oil traders, as analysts warned that prices might reach $100 following U.S. and Israeli airstrikes on Iran, which have ignited a new conflict in the Middle East. Ajay Parmar, who is the director of energy and refining at ICIS, stated that while military actions support higher oil prices, the critical issue is the closure of the Strait of Hormuz. Reports indicate that many tanker owners, oil companies, and trading firms have halted shipments of crude oil, fuel, and liquefied natural gas through the Strait of Hormuz after Iran cautioned vessels against passing through this vital waterway. This route is responsible for transporting over 20% of the world’s oil. Parmar added that prices are likely to open much closer to $100 a barrel after the weekend and may even exceed that level if the Strait remains closed for an extended period. Leaders in the Middle East have warned the U.S. that a war with Iran could push oil prices above $100 a barrel, according to RBC analyst Helima Croft. Analysts from Barclays also suggested that prices could reach $100. On Sunday, the OPEC+ group of oil-producing nations agreed to increase output by 206,000 barrels per day starting in April, which is a slight rise of less than 0.2% of the global demand. Although some alternative routes may be available to bypass the Strait of Hormuz, Rystad energy economist Jorge Leon noted that the overall impact of its closure would mean a loss of 8 million to 10 million barrels per day of crude oil supply, despite some flows being redirected through Saudi Arabia’s East-West pipeline and the Abu Dhabi pipeline. Rystad anticipates that prices will increase by $20, reaching approximately $92 a barrel when trading resumes. The situation in Iran has also led Asian governments and refiners to review their oil reserves and consider alternative shipping routes and supplies.