There is no stopping for crude. With no signs of de-escalations in the US-Israel conflict with Iran, crude prices have been skyrocketing for over a month now. Brent crude prices are on track for their biggest monthly surge.
The fear of supply disruptions also led to a surge in the US benchmark for oil, WTI. The prices climbed over the $100/bbl mark for the first time since July 2022, trading near the highs of $106/bbl as US President Donald Trump threatened to “completely obliterate” Iran’s power plant and oil facilities.
“Crude oil price surge exceeding 50% within a single month is not merely a reflection of tightening supply, it is indicative of acute geopolitical stress sending shockwaves through global energy markets,” said Kaynat Chainwala, Assistant Vice President, Commodity Research at Kotak Securities .
Oil rallies as US threatens of more strikes on key infrastructure
In a social media post on Truth Social, Trump threatens of more strikes on Iran’s infrastructure including its electricity plants, oil facilities, Kharg Island and desalination plants if the crucial waterway passage – the Strait of Hormuz is not opened.
This added to the rally for crude which rose to its two week high of $116/bbl mark on Monday. “Maybe we take Kharg Island, maybe we don’t. We have a lot of options,” Trump told the Financial Times, adding that Iran lacked the defences to prevent such a move.
Strikes at Kharg Island are likely to rattle the global energy markets as it is a key export hub for Iran, accounting for roughly 90% of the country’s oil flows.
Compounding these fears, Yemen’s Houthis launched ballistic missiles on Israel over the weekend, and reports emerged that US is preparing to deploy ground military troops in the region, which further drove the rally for oil prices.
Disruptions at Red Sea to push prices higher
As the conflict in West Asia continues to escalate, focus is now shifting towards another key shipping channel- Bab el-Mandeb Strait which links Gulf of Aden to the Red Sea. As Iran-backed Yemen Houthis entered the conflict, the potential for disruptions through this stretch of water have increased.
Analysts have pointed out that disruptions through this passage would have a significant effect on the global energy flows, as two crucial waterway passages for trade would be cut off.
“We’re talking between four and five million barrels per day going through there,” Michael Haigh Haig, global head of fixed income and commodities research at Societe Generale told CNBC on Monday, referring to the Bab el-Mandeb Strait.
Chainwala noted that Saudi Arabia’s Red Sea outlet at Yanbu remains exposed to Houthi missile threats, limiting the reliability of flows through its East-West pipeline.
“In the event of a prolonged closure of the Strait of Hormuz, oil prices could rise rapidly toward $150 per barrel. Even a partial interruption of 10–11 million barrels per day, out of the usual 17–20 million, the supply shock already eclipses the 1973 Arab oil embargo in volume terms,” the analyst at Kotak Securities said.
So is crude headed towards the $200/bbl mark?
Previously Tehran had warned that crude prices are likely to double down and will touch the $200/bbl mark. While earlier experts had cited that this would be an ‘improbable’ case, Chainwala notes that the possibility of oil at $200 now merits serious attention.
“A ground invasion would shift the threat decisively from maritime chokepoints to production infrastructure itself, drawing Saudi Aramco’s Abqaiq processing complex and Iran’s Ahvaz fields and Abadan refineries directly into the line of fire,” the analyst adds.
She flags that the combination of disrupted Hormuz flows, vulnerable infrastructure, and the absence of a credible diplomatic resolution forms the most plausible pathway to $200 oil.
“While $200 per barrel remains a tail risk rather than a base case, it can no longer be dismissed. For the first time in years, such projections are being taken seriously, reflecting how fragile global energy security has become,” she adds.
What are the next technical levels?
“From a technical standpoint, the immediate resistance level for Brent crude stands at $120 per barrel,” says Chainwals. She adds that a sustained breach of this level would open the path toward $150.
“On the MCX, traders will be watching the Rs. 10,000 per barrel mark closely; a confirmed break above this threshold could see prices test Rs. 11,500, with Rs. 12,300 as the next meaningful resistance level thereafter,” the analyst said.