The current situation of oil prices
Global oil markets have witnessed sharp fluctuations in recent days as a result of the military escalation between Israel and Iran, after crude prices rose significantly last Friday by 7% for Brent and 7.6% for WTI 10, the following sessions witnessed some decline as futures contracts for them fell.
However, prices are still around 10% high, reflecting uncertainty in the markets.
Factors affecting current oil prices
- Supply disruption concerns: the recent escalation has led to fears of disruption of oil shipments from the Middle East, especially with possible threats to close the Strait of Hormuz, through which about 20% of global oil supplies pass.
- Strikes on energy infrastructure: Israel targeted Iranian oil and gas facilities, including the South Pars gas field, raising concerns about the impact on Iranian production of about 3.3 million barrels per day.
- Financial market reactions: investors turned to safe haven assets such as gold, which rose by 1.4%, while airline stocks experienced sharp declines of up to 5%.
Possible scenarios and their impact on oil prices
- The first scenario: diplomatic pacification
If diplomatic efforts are successful, especially by the group of seven countries and the United States, prices may stabilize and then gradually decline.
In this case, it is expected that prices will return to the levels of dollars per barrel and below them.
OPEC may gradually increase production to make up for any shortfall, as Saudi Arabia and the UAE have excess capacity of up to 3.5 million barrels per day.
- The second scenario: the continuation of limited
confrontations If the confrontations between Israel and Iran continue without regional expansion, prices may experience fluctuations around current levels.
Prices may reach 80-85 dollars per barrel if threats to the Strait of Hormuz continue without an actual closure.
The risks of sea freight will remain high, while the costs of insurance for tankers will increase.
- The third scenario: large-scale regional escalation
In the event that the conflict expands to other countries or the Strait of Hormuz is closed, prices may witness sharp jumps to exceed 100 dollars per barrel.
Some forecasts suggest that prices can reach 120-150 dollars in the worst case.
Consuming countries may have to use strategic reserves, as happened during previous crises.
OPEC's ability to compensate and manage the market
The OPEC alliance reportedly has enough excess production capacity to compensate for any disruption in Iranian supplies, Spare production capacity stands at approximately 3.3 million barrels per day, roughly equivalent to Iran's current production.
This capacity is concentrated primarily in Saudi Arabia (an additional 2.5 million barrels) and the UAE (an additional 1.4 million barrels).
However, some analysts question the actual ability to increase production so quickly, as some of this capacity exists only on paper.
What are the main risks to market stability?
- The Strait of Hormuz: It remains the most important chokepoint in global oil trade, with approximately 18-19 million barrels per day passing through it.
- Gulf energy infrastructure: Any attacks on energy facilities in Saudi Arabia or the UAE could lead to a significant supply shock.
- Sanctions on Iranian exports: They could affect oil flows to China, the main buyer of Iranian oil (1.8 million barrels per day).
- The impact of the war on the global economy: Higher oil prices could exacerbate inflation and slow economic growth, especially in energy-importing countries.
Analysts' and Experts' Forecasts
Some analysts believe that markets have overreacted, and that prices could soon fall due to ample supply.
Others point out that the current situation differs from previous crises due to limited spare capacity.
Goldman Sachs expects prices to return to the $55-$59 range in the fourth quarter of 2025, barring major disruptions.
To view OLX Forex's technical analysis and forecasts for crude oil movements in the coming period, click here
Ultimately, oil markets remain on high alert as tensions in the Middle East persist. While current indicators suggest that the markets have not yet absorbed the worst-case scenario, any further escalation could lead to significant supply shocks and sharp price spikes.
Conversely, OPEC+ has short-term shock absorbers, but its ability to deal with a prolonged crisis remains limited.
