Oil costs might tip over $80 ‘within days’ as Israel vows retaliation
Oil prices are unlikely to surge much higher unless the conflict between Iran and Israel spreads to the wider Middle East, economists and analysts have said.
Brent crude oil is up 2.2pc today to more than $75, up from as low as $70 on Tuesday before Iran launched missiles at Israel.
George Lagarias, chief economist at Forvis Mazars, said: “The escalation of the Middle East conflict certainly adds a layer of uncertainty to the financial markets that rallied hard in September.
“Oil prices jumped on the news, and over the shorter term, upward pressures may well remain.
“Having said that, the conflict remains regionalised. If Saudi Arabia and other oil producers remain above the fray, we don’t believe that the prevalent scenario is a sustainable energy price rally, the kind that would reverse central banks’ determination to reduce interest rates in developed markets.”
Deutsche Bank analyst Jim Reid said that the latest rally was still a far cry from the surge in prices in April when Iran launched its last attack on Israel, sending Brent crude above $92 a barrel.
He said: “But then oil prices began to fall back in the days that followed as the White House sought to avoid an escalation, and as tensions eased.”
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said market worries “are being mitigated by expectations that Saudi Arabia will turn on the taps more fully, and lower demand from China, but upwards pressure is likely to continue while uncertainty reigns about just how far conflict will spread”.
However, some believe the latest conflict poses a greater risk.
Analysts at Saxo said: “While multiple geopolitical price spikes this past year deflated almost as soon as they emerged, the recent escalation poses a threat to supply, primarily arising from the risk of an Israeli counterattack on Iran’s nuclear and energy infrastructure, and for now, this threat to supply will counter a resumption of Libyan production and general sluggish demand.”
