The weekend airstrikes by the United States on three nuclear facilities in Iran have triggered a strong reaction in the international energy market. Brent crude and West Texas Intermediate (WTI) crude both surged, briefly hitting five-month highs. The market is closely monitoring whether Iran will retaliate against the United States, which could threaten global oil supply and exacerbate inflation risks.
This news has caused volatility in the energy market, with Brent crude futures prices surging over 3% to reach $81.40 per barrel and WTI crude rising to $78.40, both reaching new highs in five months.
As of Monday’s early Asian market trading, Brent and WTI crude oil prices maintained gains of around 2.6%, with prices around $79 and $75.76 per barrel, respectively. Despite a slight retreat in gains, market concerns about supply disruptions continue to support oil prices.
Iran is the third-largest oil-producing country in the Organization of the Petroleum Exporting Countries (OPEC) and controls the globally critical energy chokepoint, the Strait of Hormuz. The strait, with a narrowest point of only about 33 kilometers, carries about a quarter of the world’s oil and 20% of liquefied natural gas shipments.
Although Iran has previously threatened to close the strait multiple times, it has never actually done so, but its parliament has approved related closure measures.
Analysts point out that any disruption to shipping through the strait could increase oil prices, disrupt supplies, raise shipping insurance costs sharply, and force vessels to rely on U.S. military escorts.
JPMorgan analysts have cautioned that regime changes in the Middle East have often led to short-term spikes in oil prices, with the highest increase reaching 76% and an average increase of 30%.
Vivek Dhar, a commodity analyst at the Commonwealth Bank of Australia (CBA), believes that compared to a complete blockade of the Strait of Hormuz, it may be more reasonable for Iran to choose partial shipping disruptions to deter oil tankers, as a complete blockade would also cut off its own exports.
He predicts that if Iran adopts a strategy of partial disruption, Brent crude prices could rise above $100 per barrel.
Goldman Sachs also warns that if the Strait of Hormuz were completely blocked for a month, oil prices could temporarily spike to $110.
In the face of potential risks, there is no widespread panic in the international market yet. In Monday’s early Asian trading, the U.S. dollar only slightly rose, and changes in U.S. bond yields were limited, indicating that investors are adopting a wait-and-see approach.
Some optimistic observers believe that the U.S. airstrikes have weakened Iran’s nuclear capabilities, reducing long-term uncertainty and even potentially leading to regime change.
Charu Chanana, Chief Strategist at Saxo Bank, states, “The market response may not be to the escalation of conflict itself, but to the expectation of reduced long-term uncertainty it could bring.”
However, she adds, “Any signs of potential Iranian retaliation or threats to the Strait of Hormuz could quickly change market sentiment, forcing a reassessment of geopolitical risks.”
Nevertheless, analysts point out that if there is no substantial supply disruption, the oil price premium driven by current geopolitical tensions may be difficult to sustain.
(This article is based on related reports from the Associated Press and Reuters)