The escalating conflict between Israel and Iran has sent shockwaves through the oil market, leaving analysts scrambling to predict the impact on global oil prices. The surprise Israeli attack on Iranian infrastructure has sparked five days of intense warfare, raising concerns about potential supply disruptions and the possibility of wider regional conflict.
Adding to the uncertainty, U.S. President Donald Trump’s call for Iran’s ‘unconditional surrender’ has heightened tensions and fueled speculation about potential U.S. military intervention. Energy market participants are anxiously weighing the likelihood of direct U.S. involvement and the potential consequences, including worst-case scenarios like a blockade of the Strait of Hormuz, a crucial shipping lane for oil.
Oil broker PVM’s analyst, John Evans, described a ‘blanket of unease’ settling over the market, noting that while missile exchanges are becoming more frequent, the potential for rapid escalation remains a significant concern. The conflict has already had a tangible impact; Israel’s Bazan oil refinery suffered damage from an Iranian attack, and an Israeli airstrike on the South Pars gas field – the world’s largest – led to partial production suspension. This situation, Evans explained, has led to a general feeling of uncertainty among market players, making accurate price predictions incredibly difficult.
Adding to the complexity, CEO’s from major oil companies like TotalEnergies, Shell, and EnQuest have warned of potentially serious consequences for global supply and prices if attacks on critical energy infrastructure continue. Oil prices have already seen a significant increase in recent days, continuing their upward trend amidst the ongoing conflict.
Per Lekander, founder of Clean Energy Transition, points out that even before the recent escalation, the oil market was already facing challenges due to abundant supply and weak demand, potentially leading to a price reset. The current conflict, he argues, exacerbates this scenario, creating a high-risk environment where price fluctuations are unpredictable. He estimates a $10 per barrel risk premium as a fair reflection of the current market disruption.
Stephen Schork, editor of The Schork Report, expressed a more dire outlook. He warned that a major escalation in the conflict could send oil prices soaring, suggesting that current market stability might be based on ‘hope, not reality.’ Schork highlighted the potential for prices to reach $103 per barrel within five weeks and even $160 per barrel by summer’s end if major supply disruptions occur in the Persian Gulf, comparing the current situation to the most significant threats faced by the oil market since the 1990 Iraq invasion of Kuwait.
In conclusion, the Israel-Iran conflict presents an unprecedented challenge to the oil market. The uncertainty surrounding the conflict’s trajectory, the potential for increased U.S. involvement, and the risk of major supply chain disruptions all contribute to a volatile and unpredictable market environment. As the situation unfolds, oil prices remain highly sensitive to any new developments, leaving analysts and investors alike in a state of heightened alert.
