Crude oil price on August 12
Brent crude futures were up 72 cents, or 0.81%, at $89.63, while US West Texas Intermediate (WTI) crude gained 71 cents, or 0.85%, to $83.91.Both benchmarks had settled more than $1 higher on Tuesday, taking prices to their highest closing levels since July 31. That followed a roughly 5% jump on Monday, when hopes of a peace agreement between the US and Iran started to weaken.
The latest concerns were triggered by separate reports from the United States and Yemen's Iran-aligned Houthis about attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait on Tuesday.
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Iran's top security official, Mohsen Rezaei, said the Strait of Hormuz would remain closed unless Washington agreed to Tehran's conditions for ending the war. These include the release of frozen Iranian assets and an end to other conflicts across the region.
The situation around both Hormuz and Bab el-Mandeb remains a key risk for oil markets. Even temporary restrictions, or the threat of further attacks, are raising insurance costs and prompting ships to use longer routes. This is expected to keep energy flows under pressure in the near term.
What are experts saying?
The duration of the disruption will be critical for the outlook on crude prices. JPMorgan estimates that every additional month of disruption could push Brent up by about $7 to $8 a barrel. If the disruption lasts three months, the bank expects average monthly Brent prices to reach around $114 a barrel.Goldman Sachs has similarly warned that Brent could rise to $120 a barrel if shipping disruptions through the Strait of Hormuz, the world's most important oil transit route, continue.
Read more:Iran's Supreme Leader Khamenei fills 6 key military positions
However, Goldman Sachs expects the Middle East tensions to eventually ease in its base case. It sees Brent averaging $80 a barrel in the fourth quarter and $75 a barrel next year. At the same time, it said risks remain tilted to the upside because disruptions through Hormuz and the Red Sea could last longer than expected.
"The direction of our outlook is unchanged; the path and the timeline have shifted. We still expect oil to cool as we move into 2027, for three reasons: supply outside the conflict zone is expanding, with OPEC+ raising production targets, the UAE at record output and non-OPEC barrels responding to price," said Anindya Banerjee, Head of Commodity Research at Kotak Securities.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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