Oil Prices Surge As Middle East War Escalates

[Abdulrahmon Mubarak Olayinka]

Brent crude surged by 10 percent to around $80 per barrel in over-the-counter trading on Sunday, according to oil traders. The sharp rise followed U.S. and Israeli strikes on Iran, a development that has pushed the Middle East into a new phase of conflict and heightened fears of supply disruptions.

The global oil benchmark had already been climbing earlier in the year, reaching $73 per barrel on Friday — its highest level since July. Market concerns over possible military action had been building, and the actual strikes intensified those fears. Futures markets were closed over the weekend, limiting formal trading activity.

Energy analysts believe the most critical issue is not just the military confrontation itself but the potential closure of the Strait of Hormuz. Ajay Parmar, director of energy and refining at ICIS, emphasized that while military attacks support higher prices, the real driver would be any disruption to this vital shipping route.

Following warnings from Tehran, many tanker owners, oil majors, and trading firms have reportedly paused shipments of crude oil, fuel, and liquefied natural gas through the Strait of Hormuz. This waterway handles more than 20 percent of global oil trade, making it one of the world's most strategic energy chokepoints.

Parmar predicted that when markets reopen, prices could move closer to $100 per barrel and potentially exceed that level if the Strait remains closed for an extended period. Such a prolonged disruption would significantly tighten global supply and intensify market volatility.

Other analysts also foresee substantial price increases. Helima Croft of RBC noted that Middle East leaders have warned Washington that a broader war involving Iran could push oil prices beyond $100 per barrel. Meanwhile, analysts at Rabobank expect prices to remain above $90 in the near term, reflecting strong upward pressure.

Despite these tensions, the OPEC+ group agreed to increase output by 206,000 barrels per day starting in April, a relatively modest rise amounting to less than 0.2 percent of global demand. However, according to Rystad Energy economist Jorge Leon, even with alternative routes such as Saudi Arabia's East-West pipeline and Abu Dhabi's pipeline, a closure of the Strait of Hormuz could still remove between 8 and 10 million barrels per day from global supply. Rystad expects prices to jump by about $20 to roughly $92 per barrel when trading resumes. Meanwhile, Asian governments and refiners are reviewing oil reserves and alternative supply routes, with Kpler analysts suggesting that India may increasingly turn to Russian oil to offset potential Middle Eastern supply losses.

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