Oil prices hit their highest levels in two years
Global oil prices continued their strong rise during Friday trading, hitting their highest levels in nearly two years amid escalating geopolitical tensions in the Middle East and growing concerns about supply disruptions through the Strait of Hormuz.
Investors in energy markets are bracing for the possibility of oil prices reaching $100 per barrel if the current crisis continues and global oil supplies are affected.
Although prices fell slightly earlier in the session after the US announced exemptions for Russian oil purchases to ease supply restrictions, the overall trend remains upward.
West Texas Intermediate crude rose more than 8% on Friday, while Brent crude rose about 7%.
WTI crude reached around $84 per barrel, while Brent crude rose to around $87 per barrel.
Both crudes are on track for their biggest weekly gains since Russia's invasion of Ukraine in February 2022.
Strait of Hormuz sparks global supply fears
The sharp rise in oil prices began after the United States and Israel launched strikes on Iran over the weekend.
Iran responded with escalatory measures, including blocking oil tankers from passing through the Strait of Hormuz, one of the world's most important maritime energy corridors.
The Strait of Hormuz is a key transit point for about one-fifth of the world's daily oil supply, with approximately 16 million barrels of Gulf crude oil passing through it each day.
The escalating tensions have led to:
- Disruption of some oil production operations.
- The closure of refineries and liquefied natural gas facilities.
- Increased concerns about global supply shortages.
Oil expected to reach $100 per barrel
Many experts believe that continued tensions could push oil prices much higher.
A 20% reduction in global supplies could push oil prices to $100 per barrel, according to economic forecast models.
US moves to ease supply crisis
In an attempt to contain rising prices, the US Treasury Department has issued waivers allowing companies to purchase Russian oil that is currently under sanctions and on board tankers.
Indian refineries have particularly benefited from these exemptions, at a time when markets are seeking to ease bottlenecks that have forced some Asian refineries to reduce refining operations.
Ship tracking data indicates that there are about 30 million barrels of Russian oil stored on tankers in the Indian Ocean, the Arabian Sea, and the Strait of Singapore.
The US is also considering the possibility of using its strategic petroleum reserve, which stands at about 415 million barrels.
The impact of the crisis on the global economy
Analysts believe that a prolonged conflict could have far-reaching economic consequences, with the repercussions of the crisis already beginning to be felt in several sectors.
The impact of higher energy prices will ultimately reach consumers, particularly through higher fuel and energy prices, and continued tensions could push oil prices to new record highs if the conflict in the region drags on.
Oil market outlook for the coming period
Global oil prices will remain hostage to several key factors in the coming period, most notably:
- developments in the Middle East conflict
- shipping traffic in the Strait of Hormuz
- US decisions on strategic reserves
- and production levels among major producers
If supply restrictions continue, oil reaching $100 per barrel could become a realistic scenario in the markets.
