Oil prices rose on fears of war in the Persian Gulf. Now the U.S. and Israeli military strikes on Iran could disrupt oil exports and cause prices to spike.
Benchmark Brent crude oil prices closed at a seven-month high on Feb. 27 amid global worries of a larger conflict.
“As oil markets reopen Sunday evening for electronic trading, crude will almost certainly jump,” said petroleum analyst Patrick De Haan.
Energy analysts at Barclays predicted crude oil prices would hit $100 a barrel “as the market grapples with the threat of a potential supply disruption amid a spiralling security situation in the Middle East.”
The scale of the disruption will depend on how long the conflict lasts, according to De Haan.
“The exact move will depend heavily on how deep and prolonged the attacks are – and whether oil flows are materially disrupted,” he said.
But Clayton Seigle at the Center for Strategic & International Studies predicted the price reaction would be “moderate” when the markets open.
“So far there have been no reported direct attacks on oil and gas assets although shipping operators are reportedly pulling back from operating in the area,” Seigle told USA TODAY. “Over the next week, oil and gas prices will be heavily influenced by traders’ expectations for supply disruptions.”
The key questions, he said, are “how much oil could we lose and for how long?”
Will Americans pay more for gas when they fill their tanks?
U.S. gas prices averaged $2.98 per gallon last week, according to AAA. De Haan said the national average will likely roll over $3 a gallon on Monday for the first time this year. Over the next couple weeks, he expects prices to hit at least $3.10 to $3.15 a gallon.
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“Gasoline and diesel prices in the U.S. will not skyrocket overnight. However, this will accelerate the seasonal climb already underway,” he said. “That outlook could shift depending on how the situation evolves in Iran and whether oil flows are materially disrupted.”
Consumers will start seeing the impact of the war at the pump by late night on March 2, according to De Haan, but it will be measured in pennies, not dollars.
Reuters reported that Iran closed the Strait of Hormuz. Any disruption to tanker traffic could drive up oil prices.
About 20% of the global daily oil supply passes through the Strait of Hormuz every day. Saudi Arabia, Iraq and the United Arab Emirates send most of their oil exports through there.
“Oil prices will rise sharply when markets open. Should the conflict continue into Sunday, oil prices are likely to respond by increasing by $5-10 above the current $73 baseline, based on Iran’s claim to have closed the Strait of Hormuz and the disruption in tanker traffic,” energy analysts at Eurasia Group said.
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