Crude oil soars past $94/barrel; next stop $150/barrel?

Crude oil benchmarks surged past their highest in years on Friday after US President Donald Trump demanded unconditional surrender from Iran in the ongoing conflict between Tehran and Israel, after Israel and America's joint attack against Iran last week led to Iran launching retaliatory attacks across the region, including against countries hosting US military bases.

A Quick Take | What's driving the rally in crude oil rates?

Most analysts argue that the main trigger is the near shutdown of shipping through the Strait of Hormuz because of security threats, rising insurance premiums and operational uncertainties, amid reports suggesting that several tankers are stranded on both sides of the waterway.

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Oil rates are often viewed as a proxy for the broader market and global economy given its movements tend to transmit quickly into equities, currencies, bond yields and economic activity.

Benchmark crude oil rates were last seen trading around 9-13 per cent higher in Friday's intraday trade. At 1:24 am in India, Brent futures were trading up by $7.6 at $93 per barrel while WTI was quoting higher by $10.5 at $91.5 a barrel.

The 47th American president -- who assumed office in January last year -- vowed to work towards bringing Iran back onto the path of development, while demanding unconditional surrender from Tehran. He said that Iran will will have to choose a universally acceptable leader for this to happen.

Make Iran great again: Trump

"There will be no deal with Iran except UNCONDITIONAL SURRENDER! After that, and the selection of a GREAT & ACCEPTABLE Leader(s), we, and many of our wonderful and very brave allies and partners, will work tirelessly to bring Iran back from the brink of destruction, making it economically bigger, better, and stronger than ever before. IRAN WILL HAVE A GREAT FUTURE. “MAKE IRAN GREAT AGAIN (MIGA!).” Thank you for your attention to this matter!" he wrote on social network Truth Social.

Trump's remarks immediately multiplied growing concerns about a prolonged war in the Middle East that may eventually cause a cascading disruption to the global oil market, say analysts.

In intraday trade, Brent and WTI futures soared to as high as $94.5 and $92.5 a barrel, respectively. That marked their highest intraday levels recorded since August 2022.

At the intraday peaks, the contracts were on track to exit the week more than 30 per cent and 38 per cent higher, respectively.

Many analysts highlight that the Middle East crisis has already begun hampering global energy production, while concerns persist about the hindered flow of traffic through the Strait of Hormuz -- a critical waterway route that about one-fifth of the world's oil and gas supply passes through.

"The ongoing conflict has significantly altered the supply outlook for crude oil. Earlier this year, the IEA had projected a potential oil glut, estimating that global supply could exceed demand by about 3.7 million barrels per day, with the surplus possibly extending into the next year due to slower global demand growth. However, the current geopolitical developments are rapidly absorbing those surplus expectations," Sugandha Sachdeva, Founder of SS WealthStreet, a New Delhi-based research firm, told Zeebiz.com.

"With tanker movement restricted, storage facilities in several Gulf countries are beginning to face capacity constraints, forcing some producers to consider curtailing production at certain oil fields due to the lack of available storage. If the conflict persists for several weeks or months, these disruptions could tighten global supply considerably and lead to an acute shortage of crude in international markets," she said.

Meanwhile, the Trump 2.0 administration has suggested that the US Development Finance Corporation will create a $20 billion reinsurance facility in order to enable smooth movement of oil tankers through the Strait.

The development occurred as the conflict between Iran and Israel entered a seventh day on Friday.

Several analysts quickly revised their near-term projections for oil benchmarks, with some suggesting a worst-case high of $150 a barrel levels.

A sharp rise in oil prices could intensify global inflation, inflate industrial energy costs and slow economic growth worldwide, they say.

Technical Outlook | $150 per barrel in sight?

Crude oil has already given a technical breakout from a prolonged downtrend, indicating strong bullish momentum, said Sachdeva.

"In the near term, $96 per barrel remains a key resistance level, and a sustained move above this mark could trigger a sharp rally in prices. If the conflict escalates further or the Strait of Hormuz remains blocked for an extended period, crude oil prices could potentially surge towards $135 per barrel and even test the $150 mark, approaching the historic highs seen during the 2008 commodity super-cycle when oil touched around $148 per barrel," said the analyst.

MUST READ: Oil at $150 per barrel? Qatar energy minister’s warning jolts global markets—India says supplies comfortable

"That kind of a spike in oil prices would have far-reaching implications for the global economy, particularly by intensifying inflationary pressures, raising energy costs for industries and slowing economic growth across major economies," added Sachdeva.