Crude Oil Prices Could Spike Amid Iran Tensions, Strait of Hormuz at Risk
Global crude oil markets face the prospect of significant price volatility as tensions in the Middle East escalate. Analysts warn that any disruption in Iran’s oil exports or the strategic Strait of Hormuz could send prices sharply higher, potentially reaching USD 95–110 per barrel. The warning comes from a report by Equirus Securities, highlighting the asymmetric risks posed by geopolitical uncertainty in a region critical to global energy flows.
Supply Shock and Price Impact
Iran currently produces nearly 3.3 million barrels per day (mbpd), roughly 3% of global supply. Equirus noted that if this output is disrupted, even partially, crude prices could rise 9–15% due to direct supply loss. On a base price of USD 70 per barrel, this equates to an increase of USD 6–11 per barrel, lifting prices toward USD 76–81. However, the report cautioned that markets do not react linearly. If escalation threatens the Strait of Hormuz, the price response becomes structural, with a potential USD 20–40 per barrel geopolitical premium, reopening the pathway to USD 95–110 or beyond.
Market Response and Risk Premiums
Oil markets have already firmed by roughly 10% following the US military buildup in the region, as traders factor in a headline-driven geopolitical risk premium. Equirus explained that while crude initially overreacts, embedding a risk premium, prices typically adjust as trade flows are rerouted and fundamentals reassert themselves. The challenge lies in estimating the duration of disruption and the persistence of the premium, rather than predicting the initial spike.
Diplomatic Efforts Continue
The US and Iran remain locked in high-stakes negotiations over Iran’s nuclear program. A third round of talks concluded in Geneva on February 26, showing “significant progress,” though no final agreement was reached. Meanwhile, heavy sanctions and military presence from the US continue to underscore the risks to oil markets if tensions flare further.
(This article has been syndicated from ANI)
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