Brent crude held near $73 a barrel on Tuesday, up from sub-$67 levels last week, after Israeli strikes hit Iranian energy and military infrastructure. Tehran has vowed retaliation, and though ship-tanker traffic through the Strait of Hormuz remains intact, there’s growing anxiety that the conflict could spill into the waterway that carries a fifth of the world’s oil. The geopolitical premium in crude has unmistakably returned.
“Crude oil prices resumed gains on Tuesday as escalating conflict between Israel and Iran reignited supply concerns,” said Rahul Kalantri, Vice President of Commodities at Mehta Equities. “While Iran has signaled willingness to de-escalate and resume nuclear talks, uncertainty over further retaliation kept traders cautious.”
While the market reaction reflects real unease, forecasts are split on how high oil could go if events spiral further. Singapore-based DBS Bank has floated $150 as the upper bound for Brent in a doomsday scenario that assumes Iranian exports are fully knocked out and regional producers fail to plug the gap.
The Strait of Hormuz is open — for now
Crucially, there’s been no disruption to oil flows. Vessels are still passing through the Strait of Hormuz, and ports like Kharg Island remain untouched. Homayoun Falakshahi, head of crude oil at Kpler, told the Financial Times that the current Israeli strategy appears aimed at crippling Iran’s internal energy logistics, not its export infrastructure.
That may explain the relatively measured response from global markets. J.P. Morgan, one of the largest oil market participants on Wall Street, said prices currently reflect only a “7% probability” of a nightmare scenario, one in which regional tensions curtail not just Iranian exports but also threaten Gulf shipping lanes.
A wider conflict that closes Hormuz, the bank said, is still unlikely. “Iran would be damaging its own position, both economically and politically, by irritating its main customer,” JP Morgan said, referencing China’s growing dependence on Iranian crude. Even as geopolitical temperature rises, J.P. Morgan is sticking with a base case oil forecast of $60–$65 for 2025.
The U.S. investment bank also flagged potential ripple effects on inflation and monetary policy. “An attack on Iran could spike oil prices to $120, driving U.S. CPI to 5%,” it said, warning of a reversal in disinflation and an abrupt rethink of the Federal Reserve’s rate-cut trajectory.
Markets are nervous, not panicked
Still, recent price action shows nervousness is creeping in. Brent rallied nearly 9% last week after the Israeli strikes, while gold surged and equities fell. U.S. inflation expectations also nudged higher. Analysts warn that a spike in crude could push American CPI back toward 5%, complicating central bank rate-cut plans globally.
India, which imports nearly 40% of its crude via the Strait of Hormuz, is watching closely. “Almost 50% of our LNG imports also flow through this route,” said Probal Sen, Senior Research Analyst at ICICI Securities, in an interview with ET Now. “Sustained oil above $75 would hurt marketing margins for refiners and pressure the rupee.”
Public-sector oil firms such as Hindustan Petroleum and Bharat Petroleum could see earnings volatility, Sen said, though valuations may remain attractive on longer horizons.
Meanwhile, energy analysts say Gulf producers like Saudi Arabia and the UAE have every reason to keep the situation from spiraling. Both are in the middle of multiyear economic overhauls that depend on regional stability, not a war that shocks oil markets and freezes capital flows.
For now, oil traders are pricing fear, not fallout. But with every new headline from Tehran or Tel Aviv, the $150 scenario inches a little closer from the outer rim of possibility into something more plausible. It’s still a hedge. But it’s no longer a fantasy.
Also read | Crude oil prices could spike to $120, warns J.P. Morgan. Explained in 6 key points
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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