Brent oil prices climbed above $100 in early Friday trading, as traders price in the risks of prolonged disruption to energy supplies from the Gulf. The war in Iran continues without any signs of de-escalation and, perhaps most concerningly, there is a growing sentiment in financial markets that, despite their military superiority, the US and Israel appear incapable of guaranteeing the safety of tankers passing through the Strait of Hormuz. Under normal circumstances, around 20% of global oil output passes through the strait. If the current situation persists, it could lead to a more pronounced spike in prices as supply is constrained. It is also worth noting that the current price increases are taking place despite the announcement by the IEA that it will release around 400 million barrels of crude from strategic reserves. This suggests that, for financial markets, a lasting solution to the current crisis will require a realistic prospect in the near future of a return to something closer to normality in the flow of oil tankers from the Gulf. Until then, there remains scope for further increases in the price of oil, which could become sharper the longer the situation remains unresolved.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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