Crude oil prices surge to $112 as US-Iran war escalates
What's the story
Crude oil prices have witnessed a sharp spike, rising as much as 5% on Thursday to over $112 per barrel. The surge comes as tensions in the Gulf region escalate, with both US-Israel and Iran targeting energy infrastructure. The war is approaching its fourth week, causing global market instability. US crude futures have also jumped over 3%, reaching $99.39 per barrel while natural gas prices have risen by over 5%.
Retaliation response
Iran threatens to target Gulf energy infrastructure in retaliation
Iran has accused Israel of attacking facilities at its South Pars gas field, threatening to target oil and gas assets across the Gulf in retaliation. The country has launched missiles toward Qatar and Saudi Arabia, calling energy infrastructure in these countries legitimate targets. Iran also claimed responsibility for an attack that caused extensive damage to the world's largest LNG plant in Qatar.
Operational disruptions
Iranian missiles strike Bahrain and Saudi Arabia
Following missile interceptions that resulted in falling debris, Abu Dhabi has halted operations at its Habshan gas facilities. Meanwhile, Bahrain's LNG assets were reportedly hit by heavy missile strikes. Saudi Arabia intercepted several ballistic missiles targeting Riyadh and thwarted a drone attack on a gas facility in the eastern region.
Escalation warning
Iran warns of further strikes; Strait of Hormuz disrupted
Iran has warned of further strikes on energy facilities in Saudi Arabia, the UAE, and Qatar. The warning comes after the attack on South Pars, which Israeli media attributed to Israel with US consent. Meanwhile, shipments through the Strait of Hormuz have been disrupted as production losses in the Middle East are estimated at 7 million to 10 million barrels per day or 7% to 10% of global demand.
Price forecast
Analysts expect crude prices to rise further
Analysts expect crude prices to rise further from current levels. Kayanat Chainwala of Kotak Securities predicts oil could hit $120 per barrel in the near term and possibly reach $150 if the conflict continues beyond a month with heightened geopolitical tensions. Nuvama Institutional Equities shares a similar outlook, predicting that continued closure of the Strait of Hormuz could push crude prices into the $110-$150 per barrel range over 4-8 weeks.