Oil Prices Surge Five Percent Amid US-Iran Conflict Escalation
Oil prices surged by five percent on July 29 after a US military report revealed it had intercepted an Iranian 'surprise attack' on its forces, prompting strikes against Iran. The Brent crude price rose to around $88 a barrel, recovering from a three-day decline since April 2020. West Texas Intermediate (WTI) crude advanced by $.67 or .47% to $83.
The escalation of tensions in the Middle East has once again put the Strait of Hormuz at the center of investor attention. Any disruption to oil supplies could add to inflationary pressures, particularly as the Federal Reserve is set to make a rate decision on Wednesday.
According to JPMorgan estimates, every additional month of supply disruption could add around $7 to $8 per barrel to Brent prices. A three-month disruption could push monthly average Brent prices to about $114 a barrel. Goldman Sachs has similarly warned that Brent could climb to $120 a barrel if shipping disruptions through the Strait of Hormuz continue.
Anindya Banerjee, Head of Commodity Research at Kotak Securities, said geopolitical developments were once again driving crude oil prices. 'Any strike on major Gulf export infrastructure could force a retest of $95-100 and beyond,' he stated.