The current crisis in Iran, fueled by anti-government protests and international pressure through US sanctions, is poised to impact the oil market in the coming months.
While Iran's oil production is already restricted by existing sanctions, potential escalations could disrupt regional oil flow, notably through the critical Strait of Hormuz.
Global oil markets, currently well-supplied, may face challenges in the event of major disruptions, leading to significant price spikes.
Scenario 1: Tensions Remain Contained
Oil prices expected to remain range-bound between $57 and $67 per barrel, driven by OPEC+ spare capacity utilization and major buyers continuing to purchase discounted Iranian crude.
Scenario 2: Escalation and Targeted Disruptions
A potential short-term surge in prices to $75-$80 per barrel in case of targeted attacks on oil infrastructure, with IEA members releasing strategic reserves to stabilize the market.
Scenario 3: Major Conflict and Strait of Hormuz Closure
In the extreme scenario of a complete blockade of the Strait of Hormuz, oil prices may soar to $100-$120 per barrel due to a severe supply deficit and global economic concerns.
- The oil market faces three possible scenarios ranging from contained tensions to a full-blown conflict, each with distinct impacts on prices and supply dynamics.
- Key drivers include Iran's actions in targeting oil infrastructure, OPEC+ spare capacity utilization, and the release of strategic reserves by IEA members to mitigate market volatility.
The Iran crisis presents a fluid situation for the global oil market, with the potential for price fluctuations depending on geopolitical developments in the region. Monitoring key drivers such as Iranian actions and OPEC+ capacity utilization will be crucial in assessing the market's response to escalating tensions.