Crude oil price exceeds $100? What experts predict after the US and Israel attack on Iran

Khamenei’s death, confirmed by Iranian state media earlier today, prompted warnings of sharp retaliation from Tehran. US President Donald Trump announced that the 86-year-old leader had been killed on the first day of what he described as massive joint airstrikes.Notably, more than 20% of the world’s oil flows through the Strait of Hormuz, which connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. The heavy rocket attacks in the area have raised concerns about supply constraints, leading to a spike in oil prices.

The US WTI rose 3.19% to $67.29 per barrel, while Brent reached $72.87 on Friday. This anticipated the significant increase in war in the Middle East over the weekend, with growing concerns about further escalations.

Barclays sees the oil price crossing the $100 mark:

Britain’s second-largest bank, Barclays, on Saturday raised its forecast for Brent crude oil futures to $100 a barrel. “Oil markets may face their worst fears on Monday. As things stand, we believe Brent could reach $100 (per barrel) as the market grapples with the threat of potential supply disruption amid an evolving security situation in the Middle East,” the bank said in its report. The increase in forecasts came after the first attacks by the US and Israel on Iran and the latter’s retaliation. Notably, the war has escalated significantly since then, with the death of Iran’s Supreme Leader Ayatollah Ali Khamenei sending shockwaves around the world.

Iran lies along the Strait of Hormuz, through which about a fifth of the world’s oil supplies pass, Ali Vaez, head of the Iran Project at the International Crisis Group, said in a post on

Oil first reacts too violently and then adapts

Equirus Securities highlighted in its latest note that oil prices have repeatedly risen by 25 to 300% during geopolitical crises, even when the physical supply loss was temporary. “The pattern is consistent: oil first overreacts, embedding a geopolitical risk premium, and then gradually adjusts as trade flows redirect and fundamentals reassert themselves. The real challenge in forecasting is not predicting the initial peak, but estimating how long the disruption and embedded premium will last,” the broker said. The challenge is not predicting the initial peak, but how long the disruption and resulting premium will last.”At the outset of the Russia-Ukraine war, markets assumed that a protracted conflict would keep crude oil structurally above $100/bbl and push OMCs into distressed valuations. Had one known that the war would still be raging four years later, triple-digit oil would have seemed inevitable. Instead, what actually happened, after a brief spike above $120/bbl, prices returned as flows adjusted, Russian barrels diverted and fundamentals were reaffirmed. Today, crude oil trades are closer to fundamentals and OMCs are roughly three times the lows implied by the crisis,” Equirus Securities said.

If escalation threatens the main Strait of Hormuz, the premium will become structural rather than proportional, the brokerage said. “Even the risk of partial disruption could imply a geopolitical premium of $20 to $40 per barrel, reopening a path to $95 to $110+, well beyond the mechanical impact of Iranian barrels alone,” the report said.

For India, which is heavily dependent on imported crude oil, the immediate consequence is rising inflationary pressures caused by higher energy prices, said Manoranjan Sharma, chief economist at Infomerics Ratings. “High import costs are likely to widen the current account deficit and put further pressure on the fiscal deficit through higher subsidy obligations,” he added.

Rising tensions in the Middle East raise the risk of shipping disruptions and higher global freight and insurance costs even without a full blockade, said Madhavi Arora, chief economist at Emkay Global Institutional Equities. “According to our preliminary checks, India’s crude oil and LNG supplies are largely intact and India has buffers in the form of diversified imports, strategic reserves and operational inventories, which will help absorb short-term shocks,” the analyst added.

“In case tensions in the Middle East persist, higher oil prices will feed directly into input costs and macro indicators. However, if the situation normalizes, with OPEC+ also pointing to a sharp increase in production (0.4 million per day), and oil does not peak and fall below $70/bbl, the macro impact could be contained,” Arora further said.

Back in Dalalstraat…

Oil Marketing Company (OMC) stocks will remain in focus tomorrow amid the expected rise in crude oil prices. Oil refiner stocks are likely to see a rise, reflecting the rise in oil prices.

Tire and paint supplies will also be critical tomorrow as crude oil is a major source of raw materials for both paint and tire companies as many of their raw materials are petroleum-based derivatives.
Also read: https://economictimes.indiatimes.com/markets/stocks/news/will-sensex-nifty-react-amid-escalating-middle-east-war-after-khameneis-killing/articleshow/128909536.cms

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)