surged to near four-and-a-half-month highs as escalating Middle East tensions and President Trump’s ambiguous statements about potential US military involvement in the Israel-Iran conflict sent shockwaves through global energy markets.
WTI crude jumped 1.69% to $76.41 per barrel while climbed 1.29% to $77.69, reflecting growing concerns over supply disruptions in the world’s most critical oil-producing region. The uncertainty has prompted major investment banks to warn of significant price spikes, with Goldman Sachs estimating a $10 per barrel geopolitical premium and Barclays warning of potential prices exceeding $100 if the conflict escalates further.
Geopolitical Risk Premium Drives Market Volatility
Goldman Sachs analysts have calculated that geopolitical tensions could add approximately $10 per barrel to Brent crude prices from current mid-$70s levels, though the bank acknowledges oil could exceed $90 if Iranian supply faces disruption.
The investment bank pointed to the ongoing attacks by Yemeni Houthis on vessels transiting the Bab el-Mandeb Strait as a stark example of Middle Eastern oil export vulnerability. These supply route disruptions have already demonstrated how quickly regional conflicts can impact global energy security.
President Trump’s cryptic statements regarding potential US military action have further amplified market uncertainty. When pressed about joining Israel’s bombing campaign against Iranian nuclear facilities, Trump told reporters, “I may do it. I may not do it. I mean, nobody knows what I’m going to do.”
This deliberate ambiguity has created additional volatility as traders struggle to assess the likelihood of direct US involvement. The prospect of American military intervention represents a significant escalation that could trigger broader regional conflict and severe supply disruptions.
Goldman Sachs’ base-case scenario previously assumed Brent crude would average $60 per barrel in the final quarter without supply disruptions. However, this optimistic outlook appears increasingly unrealistic given the evolving geopolitical landscape and Trump’s apparent willingness to consider military action against Iran’s nuclear program.
Oil Supply Disruption Risks and Market Response
Barclays has issued even more dire warnings about potential price movements, suggesting crude could surge above $100 per barrel if Middle East hostilities intensify significantly.
The bank specifically noted that Brent could reach $85 per barrel if just half of Iran’s oil exports were disrupted. Iran currently exports over 2 million barrels of crude daily, with nearly all shipments destined for China, making any supply interruption globally significant.
The oil market’s response has been swift and decisive, with energy commodities leading broader commodity gains amid the geopolitical uncertainty. prices also climbed 0.53% to $4.010, while surged an impressive 4.19% to $2.639, reflecting broader energy sector strength. These price movements demonstrate how quickly geopolitical events can translate into tangible market impacts across the entire energy complex.
Despite the recent gains, oil prices retreated slightly as traders await clearer signals about US intentions and the ultimate scope of potential military action. Market participants remain highly sensitive to any developments that could either escalate or de-escalate the current crisis, with many adopting wait-and-see approaches while positioning for potential supply shocks.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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