Brent crude is poised for a weekly jump, having surpassed $100 per barrel due to escalating tensions in the Middle East, particularly Houthi attacks on tankers in the Red Sea and threats of extended US strikes on Iran by President Donald Trump. While prices steadied on Friday, the underlying conflicts, including missile exchanges between the US and Iran and disruptions near the Strait of Hormuz, continue to support a bullish outlook. Analysts suggest that if Red Sea traffic remains minimal, Brent could hit $120 per barrel, with $110 seen as a likely target unless a peace agreement materializes. JPMorgan analysts predict that each month of supply disruption could add $7 to $8 per barrel to Brent prices, potentially pushing monthly averages to around $114 per barrel if disruptions extend to three months.
Despite a retreat from above $100 on Friday as traders locked in profits and hopes for renewed negotiations with Iran emerged, both Brent and West Texas Intermediate (WTI) crude futures are set for weekly gains of over 7%. Brent fell to $96.28 per barrel from an earlier session high above $100, while WTI was down to $88.58 per barrel. Analysts like Phil Flynn of Price Futures Group noted the precarious state of energy markets, emphasizing tight stock levels and the potential for rapid shifts. Geopolitical events like Russia's strikes on Ukrainian ports and temporary production cuts in Kazakhstan further contribute to supply concerns.
The sustained high oil prices, particularly above $100 per barrel, are raising fears of a resurgence in inflation, impacting transportation, manufacturing, and food costs globally. This could compel central banks to maintain higher interest rates for longer, potentially leading to an economic slowdown. Goldman Sachs has even predicted Brent crude could rally above $120 per barrel by the fourth quarter if Strait of Hormuz disruptions persist. The closure of the Strait of Hormuz, coupled with Red Sea shipping disruptions and Houthi threats of a naval blockade against Saudi Arabia, highlights the vulnerability of crucial oil export routes. The market is increasingly pricing in a broader logistic-driven supply shock, indicating that Brent could remain above $100 per barrel if hostilities continue.
