Oil Prices Soar Amid Middle East Conflict

Brent crude oil prices jumped by about 10% on Sunday to around $80 per barrel as tensions rose following US and Israeli strikes on Iran, pushing the Middle East into a new conflict.

Ajay Parmar, director of energy and refining at ICIS, said that while military attacks are supportive for oil prices, the key factor is the closing of the Strait of Hormuz. This waterway is crucial as over 20% of global oil is moved through it, and most tanker owners, oil majors, and trading houses have suspended shipments via this route after Tehran warned ships against moving through it.

Parmar expects prices to open significantly higher on Monday, potentially reaching $100 a barrel or more if the Strait's closure persists. RBC analyst Helima Croft also noted that Middle East leaders have warned Washington about the potential for oil prices to surge past $100 in the event of a war with Iran.

Rystad energy economist Jorge Leon estimated that even after diverting some flows through Saudi Arabia’s East-West pipeline and Abu Dhabi pipeline, the net impact from the Strait's closure would be a loss of 8 million to 10 million barrels per day (bpd) of crude oil supply. This led Rystad to predict prices will rise by $20 to about $92 a barrel on Monday.