“Iran has an interest in using the market to exert economic pressure”: oil prices soar after US attack

Oil prices soared 13% on Monday as markets opened, with the conflict sparked by American and Israeli strikes against Iran and its repercussions in the Middle East raising fears of serious disruptions in the supply of crude. A barrel of Brent from the North Sea soared 9.90% to $80.16, after opening up 13%. A barrel of West Texas Intermediate (WTI) rose 8.25% to $72.55.

This represents a significant jump in the price of Brent, the international benchmark for black gold, which had nevertheless gradually integrated a geopolitical risk premium to appear at more than 72 dollars on Friday, far from the 61 dollars at the start of the year.

With the regional conflagration, maritime transport via the Strait of Hormuz, through which some 20% of global oil consumption passes, is compromised. “The most relevant factor for the oil market is the quantity of oil produced in the region and the location of the Strait of Hormuz, through which around 21 million barrels of crude oil and petroleum products pass daily,” insists Giovanni Staunovo of UBS.

The strait is not completely closed (a few Chinese and Iranian ships have passed through it, according to Kpler) but traffic is now almost impossible. Following the attack on two ships on Sunday off the coast of the United Arab Emirates and Oman in the Strait of Hormuz, International Maritime Organization (IMO) Secretary-General Arsenio Dominguez called on shipping companies to “avoid” the region.

Saudi Arabia and Russia increase quotas

The price of insurance is becoming prohibitive in this context, and the main shipping companies have confirmed that they are suspending the passage of their fleet. Certainly, “alternative infrastructure in the Middle East can be used to circumvent flows passing through the strait, but the net impact remains an effective loss of 8 to 10 million barrels of crude oil supply,” says Jorge Leon, analyst at Rystad Energy, in a note the day before.

In theory, oil-importing countries have reserves, with OECD members having to maintain 90 days of oil stocks, but prices above $100 are not excluded. Reacting to the war in Iran, Saudi Arabia, Russia and six other OPEC + members on Sunday increased their oil production quotas by 206,000 barrels per day for the month of April, a higher volume than expected.

“Even without a total shutdown of production, rising conflict-related premiums, route changes and insurance reassessments can keep crude oil and freight costs high,” observes Charu Chanana of Saxo Markets. “As the entire Gulf region is affected, the dissipation of this geopolitical risk premium could take time, particularly given the central role of the region in global energy supply,” she insists.

Especially since “Iran also has every interest in using energy markets to exert economic pressure,” adds Charu Chanana. “Donald Trump’s Achilles heel is high oil prices,” confirms Michelle Brouhard, analyst at Kpler.