Oil Prices Poised for Volatility Amid U.S.-Israel Strikes

Oil markets are preparing for potential price volatility next week as the ramifications of recent U.S. and Israeli strikes on oil supplies in the Middle East remain uncertain. The conflict, particularly involving Iran, has heightened concerns about supply disruptions and its impact on global oil prices.

Analysts had anticipated a rapid price surge if these strikes disrupted oil shipping and critical infrastructure, such as Iranian pipelines and the Kharg Island terminal. Currently, **Brent crude** is trading at a seven-month high, closing at **$72.87** on Friday due to war fears. With **Iran** exporting approximately **1.6 million barrels** of oil per day—primarily to **China**—any interruption in this supply could compel Chinese customers to seek alternatives, further influencing global oil prices.

Strait of Hormuz and Supply Risks

The **Strait of Hormuz**, a crucial waterway through which **20 percent** of the world’s oil supply passes daily, adds another layer of complexity. Major exporters, including **Saudi Arabia**, **Iraq**, and the **United Arab Emirates**, rely on this strait for their shipments. However, experts suggest that Iran has little incentive to close the strait, as doing so would also halt its own exports, harming its primary customer, China.

In a prewar scenario, **Rystad Energy** estimates that limited strikes targeting Iran’s nuclear program and the **Revolutionary Guard** could drive prices up by **$5 to $10** purely based on market fear. Should the situation escalate into a broader conflict involving Iranian disruptions of tanker traffic, crude oil prices could exceed **$90 per barrel**, with U.S. gasoline prices potentially soaring “well above” **$3 per gallon**, according to **Clayton Seigle** from the **Center for Strategic & International Studies**. Last week, average U.S. gas prices stood at **$2.98** per gallon, as reported by the American Automobile Association (AAA).

As the situation develops, traders and analysts will be closely monitoring any news related to Iranian oil infrastructure and shipping routes. The interplay between geopolitical tensions and market reactions could lead to significant fluctuations in oil prices as the week unfolds.