Commodity update news: Oil prices could surge more due to Middle East conflict

Oil prices could surge past $200 a barrel if Iran's oil installations are taken offline, a chief commodities expert said. Iran accounts for over 2 million barrels of crude exports per day. Traders are hedging against the risk of oil disruption as Middle East tensions heat up.

Oil Prices Could Surge Beyond $200 if Middle East Tensions continue

According to SEB’s chief commodities analyst Bjarne Schieldrop, escalating tensions in the Middle East could push oil prices above $200 per barrel if Iran's crude production is severely impacted. Iran currently produces over 2 million barrels of crude and exports per day. Schieldrop explained that if conflicts in the region were to devastate Iran’s oil infrastructure, it would drastically reduce OPEC+’s spare capacity, tightening global supply and driving prices higher.

Schieldrop emphasized that this scenario would not only drive prices higher but also increase market uncertainty.

He noted, "The next pressing question for the market would be: What happens next in the Strait of Hormuz? This would undoubtedly add a significant risk premium to oil prices."

In a scenario where oil reaches $200 per barrel, Brent crude—the global benchmark—would see a 161% surge from its current level.

Still, some investors are betting on the possibility of damaged oil output. Nearly 27 million barrels of Brent $100 options calls were traded on Wednesday, meaning that traders are hedging against the risk of triple-digit oil prices.

Oil prices drop over 4% after report Israel won’t target Iran’s oil facilities

Oil futures fell over 4% on Tuesday, with U.S. and global benchmark prices hitting their lowest levels in about two weeks following reports that Israel would refrain from targeting key oil infrastructure in Iran.

Adding to the decline were renewed concerns over China’s energy demand. The International Energy Agency attributed its downgraded oil demand growth forecast to weaker-than-expected demand from China, further pressuring oil prices.

Brent crude futures dropped $3.21, or 4.14%, settling at $74.25 per barrel, while West Texas Intermediate (WTI) futures fell $3.25, or 4.4%, to close at $70.58 per barrel. Earlier in the day, both benchmarks had declined by as much as $4, hitting their lowest levels since early October, following a 2% drop in Monday's session.

China’s Oil Demand Slumps

Oil prices faced additional pressure from geopolitical news and an International Energy Agency (IEA) report on Tuesday, which lowered next year's oil demand forecast due to China's sluggish economy.

The IEA cut its global oil demand growth forecast from 903,000 to 860,000 barrels per day, a reduction of 40,000 barrels. The report highlighted that “Chinese oil demand continues to fall short of expectations and is the main factor dragging down overall growth.” While China had been responsible for 70% of global oil demand growth in 2024, it is expected to contribute just 20% this year and in 2025.

Geopolitical tensions have obscured long-standing structural issues in the oil market, which have kept prices from rising significantly despite the Middle East unrest. In addition to weak Chinese demand, Saudi Arabia—the world’s top oil exporter—has indicated it may increase supply, reversing its recent strategy of cutting production to support prices.

In September, the Financial Times reported that Saudi Arabia was prepared to abandon its unofficial target of $100 per barrel.

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