Oil prices have surged by more than 7% on Friday after a sudden spike in tensions in the Middle East following Israel’s series of coordinated attacks on Iranian nuclear and military facilities. Brent crude climbed 7.4% to $74.49 per barrel from $69.65.
Similarly, West Texas Intermediate (WTI) crude climbed 7.86% to $73.39 per barrel, up from $68.05 before. This is the largest one-day increase in almost five months and reflects market anxiety over possible supply disruptions from an area that supplies almost a third of the world’s oil.
In the initial hours following the attack, oil markets were chaotic. The prices jumped temporarily by over 10% to their highest since January before recovering some ground in Asian trading to about 7.5% higher, with Brent at $74.50 and Nymex light sweet crude at $73.20.
Analysts warned that prices could reach $120 per barrel if the conflict leads to a prolonged disruption of shipping through the Strait of Hormuz, through which nearly 20% of world oil shipments pass. “It’s a powder keg situation, one that could be defused in minutes as it was in April and October last year when Israel and Iran pounded each other directly,” Vandana Hari, Vanda Insights founder, said.
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“It could also drag out into a more extensive conflict that destabilizes Mideast oil supply,” she added.
Likewise, MST Financial Head of energy research, Saul Kavonic, put it this way: “What we are seeing here is a very early-stage risk-on response. But in the next day or two, the market will need to account for where this could lead.”
Global Commodities Watch Senior Strategist Amir Haddad warned: “Any disruption to the supply of oil in the region could drive prices to $80 or even $90 or more. Markets are very sensitive to geopolitical risk, and this strike has sent a very clear message.”
As tensions between Israel and Iran escalate and things remain uncertain, global markets are on high alert, with energy security at stake. The increase in oil prices threatens supply chains in war-torn regions.
Experts predict that prolonged volatility will have long-term economic consequences, especially for energy-dependent countries. Diplomatic efforts to avert further escalation are now in spotlight.
The Diplomatic Insight is a digital and print magazine focusing on diplomacy, defense, and development publishing since 2009.
