Oil prices are expected to surge after US President Donald Trump ordered airstrikes on three key Iranian nuclear sites.
The attacks were carried out by American jets at Fordow, Natanz, and Esfahan.
The move has raised concerns over possible disruptions in a region that accounts for a third of the world’s oil production.
Brent crude futures have already jumped 11% since Israel’s attack on Iran last week.
Path toward $100 oil
The US airstrikes have sent the oil market into a frenzy, with options markets going haywire and freight and diesel prices soaring.
Saul Kavonic, an energy analyst at MST Marquee, said “This could set us on a path toward $100 oil if Iran responds as they have previously threatened to.”
He added that the US attack could escalate the conflict by provoking Iran to target regional American interests or disrupt shipping through the Strait of Hormuz.
Key shipping lane for OPEC members might be affected
The Strait of Hormuz is a key shipping lane for not just Iranian oil but also for Saudi, Iraqi, Kuwaiti and other OPEC members’ shipments.
Joe DeLaura, a former trader and global energy strategist at Rabobank, said “the market wants certainty” and the US airstrikes have pushed it firmly into the Middle East theater.
He predicted prices could rise into the $80-to-$90 per barrel range as a result of these developments.
Fate of oil prices now depends on Iran’s reaction
The fate of oil prices now hinges on how Iran reacts to the US airstrikes.
Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd, said “If the US provides direct military support to Israel and plays its part in removing the current regime, the initial market reaction will be a price spike.”
However, he also noted that his firm expects oil won’t become part of this conflict as it’s not in either side’s interests.
Tanker rates have surged nearly 90%
The cost of hiring a ship to transport crude oil from the Middle East to China has skyrocketed by nearly 90% since Israel’s attacks began.
Earnings for vessels carrying petrol and jet fuel have also surged, along with insurance premiums.
The risk to vessels in the region was highlighted when two oil tankers collided, causing a massive explosion.
However, the ship’s owner denied any connection to the ongoing conflict.