Oil prices are likely to surge when the market opens on Monday, following the attack on Iran by the US and Israel, but the longer-term impact will depend on the duration of the conflict, analysts said.
The US attacked Iran by air and sea on Saturday, with President Donald Trump promising to destroy the country's missile industry. Israel also launched strikes against Tehran and other major cities. Iranian officials have warned of a “crushing” retaliation.
Vandana Hari, chief executive of Singapore-based Vanda Insights, expects prices to jump to $80 per barrel if the war continues until Monday “in a knee-jerk reaction”.
Brent, the benchmark for two thirds of the world's oil, closed up 2.87 per cent on Friday at $72.87 a barrel, while West Texas Intermediate, the gauge that tracks US crude, ended the session 2.78 per cent higher at $67.02 a barrel.
“Oil prices will see an initial spike when the market opens on Monday,” said Amro Zakaria, global financial markets strategist and founding partner of Kyoto Network and Madarik Ventures. “Should the strikes end quickly, I expect the prices to come back down as the market is oversupplied.
“The worst-case scenario would be if the strikes turn into a protracted war. Then we are talking about potentially 20 per cent of the global supply not finding its way to the markets, and only then we might see oil closer to the $100 mark.”
The oil market has priced in some risk premium in recent days, said UBS strategist Giovanni Staunovo. “Now market players will watch ahead of the market opening if oil flows get disrupted or not.”
Ms Hari said that if the war carries on for days “with Iran and its proxies retaliating to the fullest extent, we are looking at the worst-case scenarios for oil, including a major disruption of oil flows through the Middle East, unless the US is able to pre-emptively disarm Iranian navy and military and ensure tanker traffic through the Strait of Hormuz continues to flow normally”.
Lombard Odier had said earlier that if US strikes led to a major Iranian response, including prolonged disruption to the Strait of Hormuz, it could rattle global energy and financial markets.
The Swiss bank estimates that a temporary spike in oil prices to $100 per barrel – or beyond – is plausible and global LNG prices would also be affected if Iran moves to block the strait.
About one-fifth of the world’s total daily oil consumption, or around 20 million barrels of oil, passes through the Strait of Hormuz.
Earlier this month, Iran briefly closed parts of the strait for “security precautions” due to naval drills.
Energy infrastructure targets
Robin Mills, chief executive of Qamar Energy, said Israel may have broadened its targets in the latest strikes.
“I believe Israelis had suggested Iranian domestic energy infrastructure could be targeted this time. That has some knock-on effects,” he said.
“Some reports of explosions heard at Kharg [Island] and Dezful, which could indicate targeting oil facilities,” he added.
Iran accounts for around 4 per cent of global crude supplies, most of which is destined for Asian markets.
Although sanctions have significantly weakened Iran’s oil output, Opec estimated its production at around 3.5 million barrels per day in 2025, with China as its largest customer.
“The lion’s share of Iranian exports goes to China, so they would be the most impacted. But at the same time, China has a healthy level of stocks so it would not face any short-term shortage of supplies,” said Amena Bakr, head of Middle East Energy and Opec+ research at Kpler, an independent global commodities trade intelligence company.
“Over the past year, China has been accelerating the building up of its oil stocks.”
Meanwhile, the group of eight Opec+ producers will be holding a meeting on Sunday, where they will consider the impact of the war.
“Before the conflict erupted, our base-case scenario at Kpler was an increase of 137,000 bpd, but now the group can possibly consider a larger increase if there is a risk of supply loss,” Ms Bakr said.
Mr Mills said Gulf producers were already positioning themselves to mitigate supply risks.
“Saudi, the UAE, etc, were already boosting production to cover for any disruptions. They can more than replace Iranian exports – of course as long as there are no Gulf disruptions,” he added.
Regime change
The US President has said that the objective of the war is a regime change.
“So these strikes/conflict might go on for an extended period of maybe weeks,” Ms Bakr said. “The strikes last summer were clearly limited and the US made it clear that it was a “one and done” operation.
“So the impact we saw on oil prices last year was a sharp spike and then prices dropped. This time we may see a different scenario with higher prices holding a large geopolitical premium until the conflict stops and the market doesn’t see a major outage in supply.”
Mr Mills was sceptical over the prospect of regime change.
“If the US seriously intends a regime-change campaign, I don’t believe that’s achievable, but it would mean months,” he said. “It doesn’t seem the US has the forces or munitions in place for that.”
