Home Commodities Oil Prices Could Jump 15% on Disruptions in the Mid-East: Expert Outlook

Oil Prices Could Jump 15% on Disruptions in the Mid-East: Expert Outlook

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  • Oil prices may need to rise 15% on account of geopolitical escalations in the Middle East, Rapidan founder Bob McNally said.
  • The market is too complacent, given recent tensions between the US and Iran, he told Bloomberg TV.
  • “I think there needs to be at least $12 of geopolitical risk,” he said. 

Oil markets are too complacent about rising geopolitical risks, and prices may need to rise 15%, Rapidan Energy founder Bob McNally told Bloomberg TV.

In his view, there’s no sign of easing tensions in the Middle East, as the current conflict between Israel and Hamas may be starting to bring in larger oil disruptors. The risk of an oil supply shock from a geopolitical event is now at least 30%, McNally emphasized.

Already, Israeli operations in the Gaza Strip were the cited reason behind the Houthi rebel group’s Red Sea attacks on passing commercial vessels through last month, temporarily pushing oil prices higher.

While this has triggered a US-led security task force to move into the region, Iran has since responded with its own Red Sea presence to counter this. Tensions were only made worse last week when the US accused Iran for a drone strike on an Indian Ocean tanker.

“This is not de-escalating. I think the market is too complacent,” he said. “I think there needs to be at least $12 of geopolitical risk.” 

With Brent crude, the international benchmark, currently near $78, that would mean oil prices could swing up into the $90 level.

If Iran was to escalate and attack shipping lanes in that region, it would pose a greater threat than the Red Sea turmoil has so far, McNally added. That’s especially true if Iran was to target vessels passing through the Strait of Hormuz, the only body of water linking the Persian Gulf to the rest of the world. 

“The Red Sea is a shortcut. It’s no fun having to take two extra weeks and going around but it can be avoided,” he said. “Hormuz is a bottleneck; that is a heart attack. And I think that’s going to come on the table as Iran continues to escalate here.”

Apart from Iran, McNally is also concerned about headbutting between Lebanon, Israel, and Hezbollah to follow as activity in Gaza winds down. 

Through the tail-end of 2023, oil markets have broadly slumped, given a global supply-demand imbalance and temporary concern over geopolitical threats.

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