Oil prices surged by more than $2 a barrel on Friday as investors factored in concerns of an escalation of conflict in the Middle East that could disrupt oil supplies.
Reports of the U.S. military striking Iranian targets in Syria triggered this market reaction.
Brent crude oil, against which Nigerian oil is priced, rose by $2.03 or 2.3% to $89.96 a barrel while the U.S. West Texas Intermediate crude oil climbed $1.89, or 2.3%, to $85.1 a barrel.
The catalyst for this surge was the U.S. military’s retaliatory strike on weapons and ammunition facilities in Syria after Iranian-backed militia attacked U.S. forces stationed in the Middle East.
At the United Nations, Iranian Foreign Minister Hossein Amirabdollahian warned that if Israel’s offensive against Hamas did not cease, the United States would “not be spared from this fire.”
Furthermore, projectiles struck two Egyptian Red Sea towns, causing injuries, underscoring the risk of regional spillover from the ongoing conflict.
While these developments have not yet directly impacted oil supplies, they have fueled fears that the conflict may spread and disrupt exports from Iran, a significant crude producer and supporter of Hamas.
The possibility of intensified conflict could also affect oil shipments from Saudi Arabia, the world’s largest oil exporter, and other major producers in the Gulf.
According to RBC Capital analyst Helima Croft, the complex geopolitical landscape in the region makes it challenging to predict the future course of the crisis.
Goldman Sachs analysts added that while they maintained their first-quarter 2024 Brent crude price forecast at $95 a barrel, any reduction in Iranian exports could cause baseline prices to increase by 5%.
In the less likely scenario of a trade interruption through the Strait of Hormuz, where 17% of global oil production transits, prices could surge by 20%.
Despite these heightened geopolitical tensions, uncertainties persist about oil demand, as economic conditions around the world remain precarious.
