Activity in the Strait of Hormuz, through which a fifth of the world’s oil and gas supplies pass, has all but ceased since the attacks, reports ProFinance.
Iran’s retaliatory strikes against neighboring Gulf states threaten regional infrastructure that plays a key role in the global energy market.
“The impact of the conflict on the global economy is highly dependent on oil and gas supplies through the Strait of Hormuz,” said Norbert Rücker, an economics expert at Julius Baer.
“The main threat comes not from plant closures, but from serious damage to the region’s key oil and gas infrastructure,” he added.
Experts’ assessment
Experts forecast oil prices to remain high in the near future due to the escalation of the conflict in the Middle East. Particular attention is paid to possible consequences for supplies through the Strait of Hormuz, which is a key route for transportation of more than 20% of the world’s oil.
Tankers have been damaged in the attacks, leading to the suspension of oil, fuel and liquefied natural gas shipments through the Strait of Hormuz by many shipowners, major oil companies and trading houses.
Analysts at Citi forecast Brent crude oil prices to fluctuate between $80 and $90 a barrel over the next week. Prices are expected to fall to $70 a barrel once inflation subsides.
Goldman Sachs estimates the current risk premium in oil prices at $18 per barrel. If only 50% of flow through the Strait of Hormuz is suspended for a month, this premium is expected to fall to $4. However, as the bank notes, prices could rise significantly if the market demands longer term compensation for supply disruptions.
Wood Mackenzie warns that oil prices could exceed $100 a barrel if the situation in the Strait of Hormuz does not stabilize.
According to the company, this crisis creates a double effect on supply: in addition to the cessation of current exports through the strait, additional volumes of OPEC+ supplies and a significant part of OPEC’s reserve capacity, which is usually a key tool for balancing the global oil market, become unavailable.
Oil prices stabilize later
Societe Generale analysts suggest that the most likely scenario for oil prices will be a short-term spike followed by a partial decline. This is due to the fact that markets will view supply as secure.
Gold prices rose 1.6% to $5,362 a troy ounce as investors sought to protect their holdings. The dollar strengthened by 0.4% against a basket of currencies of major U.S. trading partners.
Futures on the S&P 500 index signaled a possible 0.8 percent drop in the index when trading opened on Wall Street on Monday. Nasdaq 100 futures were unchanged.
Stock markets in Asia showed declines on Monday, with Japan’s Topix and Hong Kong’s Hang Seng index losing 1.5 percent and 1.4 percent, respectively.
