Citibank analysts have projected that, should hostilities between Iran and Israel escalate and disrupt 1.1 million barrels per day (bpd) of Iranian oil exports, Brent crude oil prices could rise to between $75 and $78 per barrel. In their analysis released on Thursday, they indicated that this scenario would see prices approximately 15% to 20% above pre-conflict levels, with prices previously around $65 per barrel in May. On Thursday, Brent crude futures showed a notable increase, climbing by $1.48, or 1.9%, reaching $78.18 per barrel. Meanwhile, U.S. West Texas Intermediate crude for July rose by $1.72, or 2.3%, to $76.86 per barrel.
In a related note, JP Morgan highlighted that in the event of a more extensive regional conflict, particularly involving a closure of the Strait of Hormuz, oil prices could potentially soar to $120-$130 per barrel. The rising tensions in the Iran-Israel conflict have sparked concerns regarding potential supply disruptions in the Middle East, which is a critical oil-producing region. Currently, Iran stands as OPEC’s third-largest oil producer, with a production capacity of about 3.3 million bpd. Citi mentioned that if disruptions reach 3 million bpd over several months, prices might escalate to around $90 per barrel.
While a closure of the Strait of Hormuz may cause a significant price surge, Citi believes the effect would be short-lived as efforts to reopen the route would be prioritized. They also noted that potential disruptions in Iranian oil exports might have a lesser impact on global oil prices than anticipated due to decreased exports and lower demand from China. Moreover, improved production from other countries could balance out the effects of any interruptions in Iranian oil supply, with OPEC’s increased output possibly alleviating price pressures. Additionally, various analysts, including those from Goldman Sachs and Barclays, have provided insights into potential price increases linked to geopolitical risks surrounding Iranian oil exports.