Brent crude jumped 10 per cent to about $80 a barrel over the counter on Sunday, oil traders said, while analysts predicted that prices could climb as high as $100 after US and Israeli strikes on Iran plunged the Middle East into a new war.
The global oil benchmark has rallied this year and reached $73 a barrel on Friday for its highest since July, buoyed by growing concern over the potential attacks that arrived a day later. Futures trading is closed over the weekend.
“While the military attacks are themselves supportive for oil prices, the key factor here is the closing of the Strait of Hormuz,” said Ajay Parmar, director of energy and refining at ICIS.
Most tanker owners, oil majors and trading houses have suspended crude oil, fuel and liquefied natural gas shipments via the Strait of Hormuz, trade sources said, after Tehran warned ships against moving through the waterway. More than 20pc of global oil is moved through the Strait of Hormuz.
Middle East leaders have warned Washington that a war on Iran could lead to oil prices jumping to more than $100 a barrel, said RBC analyst Helima Croft. Rabobank analysts are slightly less bullish, seeing prices holding above $90 a barrel in the near term.
The OPEC+ group of oil producers agreed on Sunday to raise output by 206,000 barrels per day (bpd) from April, a modest increase representing less than 0.2pc of global demand.
While some alternate infrastructure could be used to bypass the Strait of Hormuz, the net impact from its closure would be a loss of 8million to 10m bpd of crude oil supply even after diverting some flows through Saudi Arabia’s East-West pipeline and Abu Dhabi’s pipeline, said Rystad Energy economist Jorge Leon.
Rystad expects prices to rise by $20 to about $92 a barrel when trade opens.
The Iran crisis also prompted Asian governments and refiners to assess oil stockpiles and alternative shipping routes and supplies. Kpler analysts said in a webinar on Sunday that India might turn to Russian oil to make up for potential Middle East supply loss.
