The latest escalation between the US and Iran has brought the April ceasefire to its most difficult moment so far, with crude prices rising and financial markets, including US equities, falling. Rystad Energy estimates that if hostilities were to resume in earnest, we could see prices move towards $150 per barrel.
Here is Rystad Energy’s market update from Jorge Leon, senior vice president and head of geopolitical analysis:
“At this stage, it is too early to say whether the current escalation marks a full resumption of hostilities or a dangerous but still containable episode.
That uncertainty is also reflected in today’s oil price action, with Brent front-month prices rising sharply to around $94.5 per barrel before easing back closer to $93 per barrel.
The immediacy of this movement, however, could be blunted by three primary factors: the record level of Strategic Petroleum Reserve (SPR) releases that has also resulted in record US exports, reduced crude imports by China, and continued movement of around 5 million barrels per day of crude bypassing the Strait of Hormuz through Saudi Arabia’s Yanbu port.
What is clearer is that the probability of a near-term deal has narrowed from our prior assessment of around 40% a few weeks ago.
The direction of travel is now more uncertain, and the next few days will be critical in determining whether diplomacy can reassert itself or whether the conflict moves into a more sustained escalation cycle.
As a result, oil price volatility is likely to remain elevated until there is clearer evidence that the ceasefire can hold or that diplomatic channels are regaining traction.”
