Analyst says regional leaders warn Trump that oil prices may break $100

Investing.com - The US and Israel have launched a new round of strikes against Iran, escalating tensions across the Middle East and increasing risks in the global energy markets. Key tanker traffic through the Strait of Hormuz has shown signs of disruption.

RBC strategist Helima Croft said, “If this conflict lasts more than a few days and the IRGC adopts a survival strategy based on exploiting President Trump’s economic vulnerabilities, oil prices could surge significantly.”

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The latest round of attacks appears to have had a broader regional impact than the June actions, reportedly causing more severe damage to Iran’s leadership, including Supreme Leader Ali Khamenei. The ultimate effect on oil prices now depends on Tehran’s next move—whether the IRGC will scale back or escalate its actions—adding to the uncertainty.

Iran has attacked US bases in the region and targeted well-known airports, ports, and landmarks across the Gulf, highlighting the risk of further retaliation.

The oil market is especially focused on the Strait of Hormuz, a vital chokepoint carrying about 20% of the world’s oil supply. Oil tanker traffic through the waterway has significantly decreased, heightening fears of supply disruptions.

Croft warned that even without an official closure, the IRGC still has effective tools to disrupt flow.

She said, “While the IRGC may not be able to physically close the Strait of Hormuz, they could deploy small boats, mines, drones, and missiles, forcing insurers and shipping companies to avoid the route before hostilities cease.”

Croft added that regional leaders have warned the Trump administration about spillover risks.

She stated, “From what we understand, regional leaders have warned Washington about the risk of escalation with Iran again, and have pointed out that a break above $100 per barrel is a clear and realistic danger.” She noted that some military planners question whether regime change goals can be achieved solely through air power.

HSBC strategist David May emphasized another limiting factor, saying, “Although there is significant idle capacity in the Middle East Gulf region, if the Strait of Hormuz is closed, that capacity will be unusable.”

This context also limits OPEC’s ability to buffer the market. Most OPEC+ oil-producing countries are near maximum capacity, with only Saudi Arabia holding meaningful spare capacity. Even so, analysts warn that if key waterways are disrupted, additional oil supplies can only provide limited relief.

UBS oil analyst Josh Silverstein stated that higher crude prices could eventually stimulate additional non-OPEC supply, but warned that these increases would take time to materialize.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.