LONDON: US and Israeli strikes against Iran and the repercussions in the Middle East are expected to send oil prices soaring when markets open, and a prolonged conflict could hit the global economy.

The oil market opens at 2300 GMT on Sunday (Mar 1), with analysts expecting a sharp rise in prices into Monday.

“I expect oil prices to be between $85 and $90,” said Amena Bakr, head of Middle East and OPEC+ research at analysts Kpler.

That would mark a significant jump in the price of a barrel of Brent – the international benchmark for crude oil, which had gradually factored in a geopolitical risk premium to trade at more than $72 on Friday, compared with $61 at the start of the year.

With the regional turmoil, maritime transport is under threat in the Strait of Hormuz, which handles some 20 per cent of global oil consumption.

In such a situation, insurance costs become prohibitive, said Bakr, and the main shipping companies have already confirmed that they are suspending the passage of their fleets along the route.

“GAP IS TOO BIG”

In theory, oil-importing countries have reserves, with OECD members required to maintain 90 days’ worth of oil stocks, but prices above $100 cannot be ruled out.

If the blockade of the Strait of Hormuz continues, “no matter how much spare capacity (in the strategic reserves) is not going to fill that gap. That gap is just too big”, said Bakr.

Another analyst at Kpler, Michelle Brouhard, described high oil prices as “the Achilles heel of Trump”.

In her view, Iran is likely to look to keep crude prices high to force Trump to back down, as he promised his electorate low prices, at a time when the United States is already gearing up for mid-term elections at the end of this year.