Oil: Price spike extends with war risk – Danske Bank

FXStreet Insights Team FXStreet

Danske Bank’s Danske Research Team highlights a sharp jump in Oil prices as Middle East tensions escalate, with Brent crude quoted at USD 116/bbl. The bank notes producers shutting down output and traffic halted through the Strait of Hormuz. Analysts stress that Oil prices may rise further while the war continues and that any resumption of shipments could trigger a reversal.

War-driven supply shock lifts Brent

"Last week saw a sharp increase in oil and gas prices following the developments in the Middle East. Overnight, oil prices continued to increase with Brent crude up 25% to USD 116/bbl."

"The increase follows the developments over the weekend in the Middle East, where producers have started to shut down production amid the halt of traffic through the Strait of Hormuz and a large oil depot in Iran was hit."

"The pace of the price increase and the level of prices are reminiscent of the developments in 2022, when Russia attacked Ukraine. Then US sold strategic reserves to help cap the price increase. It will likely take similar action although, it will not be able to replace all the oil shutdown in in the Middle East. It further raises the pressure on the US to finish the war to cool energy markets."

"The current situation is unprecedented, and we stress that the oil price may rise further as the war continues."

"The key point for the oil market and a reversal of prices is still a potential resumption of shipments through the Strait of Hormuz."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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