Brent oil prices are trading above $106 as the European session gets underway. The war in the Gulf, which has now lasted for more than a week, is leaving traders increasingly nervous about the impact a protracted conflict may have on the global supply of energy. The Persian Gulf region accounts for roughly one quarter of the world’s oil output, with most of it shipped in tankers via the Strait of Hormuz. This maritime route is now, in practical terms, closed due to the threat of attacks, meaning that the world’s main oil exporting hub is effectively frozen out of the market. Considering that the conflict has entered its second week and there is no obvious path or timeline for a ceasefire, it is hardly surprising that oil traders are pricing in a future scenario of reduced supply, resulting in higher prices. This dynamic is only likely to intensify the longer the conflict continues without a realistic prospect of de-escalation, creating scope for further increases in the price of the barrel.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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