Global oil prices spiked sharply after US and Israeli military strikes on Iran escalated tensions in the Middle East, raising fears of supply disruptions and a potential closure of the Strait of Hormuz — a critical artery for global energy trade.
Brent crude jumped 10 percent in over-the-counter trading on Sunday to around $80 per barrel, traders said. The benchmark had already climbed to $73 on Friday — its highest level since July — amid growing speculation of military escalation. Futures markets remain closed over the weekend.
Energy analysts warned that the conflict could drive prices significantly higher. Ajay Parmar, Director of Energy and Refining at ICIS, said the decisive factor would be whether Iran moves to close the Strait of Hormuz.
“While the military attacks are supportive of higher oil prices, the key issue is the closure of the Strait of Hormuz,” Parmar noted.
Tehran has reportedly warned vessels against transiting the strait, prompting many tanker operators, oil majors, and trading houses to suspend crude oil, fuel, and LNG shipments through the waterway. More than 20 percent of the world’s oil supply passes through the Strait of Hormuz, making it one of the most strategically vital chokepoints in global energy markets.
Helima Croft, analyst at RBC Capital Markets, said regional leaders have cautioned Washington that a prolonged war with Iran could push oil prices beyond $100 per barrel. Analysts at Rabobank expect prices to remain above $90 in the near term, reflecting persistent supply concerns.
Meanwhile, the OPEC+ alliance agreed on Sunday to increase production by 206,000 barrels per day starting in April — a modest rise equal to less than 0.2 percent of global demand. Market observers suggest the increase is unlikely to offset a major disruption in Gulf exports.
According to Rystad Energy economist Jorge Leon, even if Saudi Arabia diverts supply through its East-West pipeline and Abu Dhabi utilizes its alternative export route, a full closure of the Strait could remove between 8 to 10 million barrels per day from global supply.
Rystad projects oil prices could jump by $20 when markets reopen, potentially reaching $92 per barrel in the immediate term.
The crisis has also prompted Asian governments and refiners to reassess strategic stockpiles and explore alternative sourcing options. Analysts at Kpler indicated that India may increase imports of Russian crude to compensate for potential supply losses from the Middle East.
With geopolitical tensions intensifying and supply risks mounting, global energy markets are bracing for heightened volatility in the days ahead.
By Reuters
