Oil may be used again as liquid gold.
Crude oil futures (CL=F) rose 9% last week, the biggest weekly gain since March 2023, on the back of escalating tensions in the Middle East.
Bullish Brent crude bets rose to a five-week high as more traders bet on $100 oil after Israel said it would retaliate for Iranian missile strikes.
I had the opportunity to speak with Rystad Energy’s Claudio Galimberti, who said that with tensions in the Middle East rising to “one of the highest levels in 40 years,” traders are worried about “major supply disruptions.” “It’s clearly priced in risk.”
According to Blue Line Futures, Iran is a major player in the global oil market, producing more than 3 million barrels of crude oil per day, so the increased risk of supply disruptions will likely lead to a “significant impact on prices” in the short term. There is a possibility that it will be a big tailwind. Bill Baruch.
“Then oil prices will rise significantly. That’s a game changer,” Baruch warned.
If you’re looking for a way to avoid the risk of supply disruptions, Galimberti says Exxon Mobil (XOM), Chevron (CVX), and Shell (SHEL) are “obvious candidates” given their limited exposure to the Middle East. The company is considered to be included in the list of “beneficiaries”.
Wall Street appears to agree, judging by last week’s stock price movements. Exxon stock rose 7.8% to a record high, while Chevron stock rose 3.6%.
Wall Street is trying to assess the risk of a possible broader conflict. One of the scenarios being discussed is the possible closure of the Strait of Hormuz, a key corridor and hub for the global oil market, which accounts for nearly 30% of global oil trade.
This is a potential threat that Wall Street experts will be watching closely over the coming days.
Goldman Sachs’ Jenny Greenberg echoed the growing risk of significant disruption, writing in a note last week that “the greatest impact of the conflict is likely to come from disruptions to energy supplies, with the Strait of Hormuz A possible closure could put fresh upward pressure on inflation and weigh on growth if oil prices rise significantly further.”
Goldman predicts that Brent prices could peak around $90 a barrel if OPEC moves quickly to offset the disruption of 2 million barrels a day over six months. However, if OPEC does not act to ease the shortage, the researchers expect prices to peak in the mid-$90s.
And experts warn that the effects of further escalation in the Middle East could extend far beyond energy markets. Paul Christopher of the Wells Fargo Investment Institute said investors would be relocated to “possible havens” if the conflict escalated.
“This is likely to lead to stronger US dollars, Japanese yen and Swiss francs; higher commodity and 10-year Treasury bond prices; and lower equity markets,” Christopher wrote in a note to clients last week.
the story continues
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Have a tip about a deal, merger, activist situation, or more? Email seanasmith@yahooinc.com.
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