Rising Tensions Jolt Oil Markets from Slumber: Is the $100 Barrel Back?

Oil markets shift from indifference to cautious alertness as geopolitical risks and supply disruption fears escalate.

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Oil
Strait of Hormuz

Oil

A Wake-Up Call After Prolonged Indifference

Over the past two years, despite escalating conflicts in the Middle East,
oil traders had grown accustomed to brushing off geopolitical headlines.
Each time prices spiked, they quickly retreated as supplies remained unaffected.

However, the latest Israeli airstrike has upended that complacency.
Although no physical disruption has occurred, markets have shifted their focus from oversupply concerns to pricing in a range of risk scenarios.
This shift comes just as OPEC+ is gradually easing its production cuts,
while output from countries like Brazil and Guyana is climbing—coupled with fears that a U.S.-led trade war could dampen global demand.

A Volatile End to the Week Flips Market Sentiment

By the close of trading on Friday, Brent crude had surged as much as 13%,
ending the session up 7.2% at approximately $82 per barrel.
This spike highlighted growing unease among traders who rushed to exit short positions ahead of potential weekend escalations.

Andreas Laskaratou, CEO of AB Commodities, commented:
“When war breaks out, no one wants to risk selling before the weekend.
Even if fundamentals haven’t changed, the headlines alone are enough to move the market.”

$50 to $100: The Diverging Price Scenarios

Following the initial strike, Goldman Sachs raised its near-term oil price forecasts by $2–$3 per barrel.
Analysts warned that in a worst-case escalation, prices could exceed $100,
while a scenario of de-escalation and diplomatic resolution could push prices below $50 by 2026.

Hedging activity also spiked, with a surge in call option purchases—especially contracts
that would pay out if Brent surpasses $85 per barrel by June 25.
The volatility spread between calls and puts hit its highest level since March 2022.

Strait of Hormuz

Old Fears Resurface

The gravest risk haunting markets is the potential disruption of shipping through the Strait of Hormuz,
which handles about 20% of global oil supplies.
While most analysts believe a full closure is unlikely due to the U.S. military presence in the region,
even a slight uptick in perceived risk can jolt prices.

FGE NexantECA warned that a potential closure would be “a highly consequential event,”
although most traders still dismiss it as improbable.
Helima Croft of RBC Capital Markets echoed that view, noting, “It would be extremely difficult for Iran to sustain a prolonged closure of the Strait.”

Could Iran’s Oil Infrastructure Be Targeted?

Another worrying scenario involves Israeli strikes on Iran’s oil infrastructure or tougher sanctions if Tehran escalates its nuclear program.
So far, no direct hits on energy facilities have been reported.

Dan Pickering of Pickering Energy Partners remarked:
“Over the past decade, these types of events have mostly turned out to be selling opportunities after a spike,
as actual escalation rarely materialized.”

Still, the current situation could shift bearish if Iran responds positively to recent U.S. calls for negotiation.

Risky Rally Lacking Fundamentals

While the market has begun pricing in higher risk, analysts warn against overoptimism.
There’s been no fundamental shift in supply-demand dynamics, and no signs of real shortages so far.
Countries like Saudi Arabia and the UAE possess significant spare capacity that could cushion any temporary supply shock.

FGE analysts noted that traders are “looking to sell into strength,”
but acknowledge that taking short positions now carries high risk amid potential escalation.

Conclusion

Oil has awakened from its geopolitical slumber, and markets are now on high alert.
Between fast-moving speculators and anxious long-term investors,
Brent appears to have entered a new phase—marked not by complacency, but by heightened vigilance.

Rising Tensions Jolt Oil Markets from Slumber

Rising Tensions Jolt Oil Markets from Slumber

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