By By Elizabeth Ugbo
Oil prices are set to surge on Monday after US and Israeli forces struck Iran, escalating tensions in the Middle East. The crisis threatens supplies through the Strait of Hormuz, a key global oil route. Analysts warn that prolonged disruption could push crude above $100 per barrel. The oil market opens at 2300 GMT on Sunday, with traders bracing for volatility.
The conflict has already shaken investor confidence. Moreover, fears of supply shortages are driving inflation concerns worldwide.
Strait of Hormuz: A Critical Oil Artery
The Strait of Hormuz handles about 20 percent of global oil consumption. Any disruption there affects markets immediately.
Although the waterway remains partially open, several major shipping companies have suspended operations along the route. Insurance costs have also surged, making transit financially risky.
According to Jorge Leon of Rystad Energy, a full closure could remove 8 to 10 million barrels per day from global supply. Consequently, the supply gap would overwhelm strategic reserves.
Oil Prices Could Climb Above $100
The last time crude exceeded $100 was during the early phase of the Ukraine conflict. Gas prices then spiked sharply, triggering prolonged inflation.
Amena Bakr of Kpler expects oil prices to range between $85 and $90 in early trading. That projection signals a sharp rise from Friday’s Brent price of over $72. At the start of the year, Brent traded near $61.
Furthermore, analysts do not rule out prices surpassing $100 if tensions persist.
Gas Prices and Inflation Risks
Qatar, a major exporter of liquefied natural gas, plays a crucial role in global energy supply. Rising gas prices could therefore compound inflation risks.
Higher petrol prices, increased shipping costs and air transport losses may slow economic growth. Eric Dor of IESEG School of Management warns that a short disruption may cause limited damage. However, extended conflict could trigger recessionary pressure.
OECD countries maintain reserves covering 90 days of oil demand. Still, experts caution that reserves cannot fully offset a prolonged blockade.
Stock Markets Face Pressure
Energy and defence sectors may gain from higher oil prices. However, analysts expect declines in air transport, maritime shipping and tourism stocks.
Michelle Brouhard of Kpler describes high oil prices as a political risk for US President Donald Trump. She argues that Iran may seek to sustain elevated crude prices to increase political pressure ahead of US mid-term elections.
Global Outlook Remains Uncertain
While some Chinese and Iranian vessels continue to transit the Strait, broader maritime activity has slowed. The situation remains fluid.
If tensions ease quickly, markets may stabilise. Conversely, prolonged conflict could intensify inflation, disrupt trade and weaken global growth.
For now, investors await market reopening as energy markets react to the latest geopolitical shock.
