Global oil prices soared on Friday after Israel launched military strikes on Iran, marking a dramatic escalation in Middle East tensions.
Benchmark contracts — Brent Crude and Nymex light sweet — surged more than 10 percent following the announcement, as markets braced for potential disruption to oil supplies from the energy-rich region.
Traders are increasingly anxious that any prolonged conflict between Israel and Iran could severely affect crude shipments, particularly through the Strait of Hormuz — a vital waterway through which about a fifth of the world’s oil flows.
The price of crude influences costs across the global economy, from supermarket goods to fuel at the pump.
Analysts say attention will now turn to how Iran responds in the coming days. “This is an explosive situation — though one that could be defused quickly, as we saw during earlier exchanges between Iran and Israel in April and October last year,” an oil expert said. “But it could also spiral into a wider war that disrupts oil supplies from the Middle East,” she added.
In a worst-case scenario, Iran could block or target shipping in the Strait of Hormuz, disrupting millions of barrels of oil per day.
The strait, bordered by Iran to the north and Oman and the UAE to the south, connects the Gulf to the Arabian Sea. At any given moment, dozens of tankers are either entering or leaving the narrow waterway, transporting oil and gas from the region to global markets.
“What we’re seeing now is a very early risk-on reaction,” said Saul Kavonic, head of energy research at MST Financial. “But over the next day or two, markets will begin to price in where this could go.”
