Crude jumps 12% as US-Iran strikes reignite supply risks
Oil prices surged this week after the US resumed airstrikes on Iran, raising the threat of a major supply disruption through the Strait of Hormuz that could push crude above $100 a barrel.
Brent crude futures rose $1.05 to $85.28 a barrel on Thursday, while U.S. West Texas Intermediate gained $1.03 to $79.98. The advances pushed both benchmarks up roughly 12% for the week, with Brent logging a third consecutive weekly gain. The surge followed the resumption of large-scale U.S. military action against Iran, ending a pause established by a memorandum of understanding last month.
Washington conducted two major waves of airstrikes on Wednesday targeting Iran's southern coast, extending the campaign into Thursday. Iran responded with missile and drone attacks on U.S. bases in neighbouring countries, including a recently expanded air base in Jordan. Compounding the threat, Tehran has reportedly instructed the Houthi movement to stand by for potential closures of the Red Sea export route.
The immediate market concern centres on the Strait of Hormuz, a critical chokepoint for global energy. Nuvama Institutional Equities warned that an extended closure could disrupt nearly 20 million barrels per day of crude flows, potentially driving prices to between $110 and $150 per barrel. International Energy Agency Executive Director Fatih Birol echoed these supply anxieties. "Oil security is still a critical issue," Birol said on Thursday. "We should be worried, and I am worried, if the situation does not improve in the next few weeks."
Price trajectories diverge on geopolitics
Analysts are presenting a wide range of outcomes depending on the conflict's trajectory. Goldman Sachs projects Brent could exceed $110 in the fourth quarter if Gulf export recoveries remain delayed. However, the bank sees prices retreating to the $60s by year-end should tensions ease and production rebound quickly.
In the near term, traders are building in a substantial risk premium. Anindya Banerjee, head of commodity research at Kotak Securities, noted that the market is actively pricing in geopolitical risks. "Any strike on major Gulf export infrastructure could force a retest of $95-100 and beyond," Banerjee said.
Even in a best-case scenario, prices appear to have found a higher floor. "At the current point there are no signs of a ceasefire again. But in case there is a ceasefire immediately imposed, we don't expect Brent oil prices to fall beyond $70 per barrel. It is likely to remain the lower support for the near term," said Pranav Mer, senior vice president of currency and commodity at JM Financial.
For institutional investors and corporate treasuries, the return of military hostilities eliminates the complacency that followed last month's truce. The divergence between a $70 floor and a potential $150 ceiling signals that energy markets are entering a period of severe volatility, demanding hedging strategies that account for a sudden structural break in global supply chains.
