Global oil prices jumped over $90 a barrel on Friday. This surge comes as more oil production in the Middle East faces shutdowns and investors prepare for a lengthy conflict in the region.
US President Donald Trump stated that there would be “no deal” with Iran unless they agree to “unconditional surrender.” Meanwhile, Qatar’s energy minister warned that oil prices could soar to $150 a barrel if the war does not end soon.
A key Middle Eastern oil benchmark has already surpassed $100 a barrel due to ongoing tensions, prompting refineries to secure shipments that bypass the Strait of Hormuz. This vital chokepoint, responsible for 20% of the world’s crude shipments, remains effectively blocked because of the conflict.
Arne Rasmussen, chief analyst at Global Risk Management, noted that the market might have underestimated the conflict’s duration, creating a “snowball effect” as traders become more aware of the risks.
Iraq has largely halted its oil production, with Kuwait expected to follow as their storage capacity gets close to full. Analysts have warned that even Saudi Arabia, the Gulf’s leading oil producer, could see a reduction in output in the near future.
Brent crude prices were nearly 7% higher at $91.35 a barrel in London, significantly up from $72 before the conflict escalated.
Murban, another key oil benchmark from the UAE’s Fujairah port, surged to $100.25 a barrel on Friday.
The US benchmark, West Texas Intermediate (WTI), rose over 10% to $89.30 a barrel. The narrowing price gap between WTI and Brent signals a growing demand for US oil, which is seen as cheaper and less risky to procure, despite higher shipping costs during this crisis.
“It’s a safer bet to get US barrels now because you won’t have to worry about delivery risks,” explained Robert Yawger, a commodity expert at Mizuho Securities.
Amrita Sen, founder of Energy Aspects, pointed out that traders were initially cautious, hoping the conflict would resolve quickly. However, she noted the impact is significant, with at least 10 million barrels per day affected.
As the situation unfolds, some market players are predicting a return to triple-digit oil prices. A senior executive at a major energy company remarked, “The longer this goes on, the more likely it is that we will see $100 a barrel again.”