Middle East Tensions At "Highest Level," Oil Skyrockets

SEB predicts that oil could surge to $200 if Israel attacks Iran infrastructure: File Image/Pixabay

U.S. president Joe Biden's remark that he may support a strike against Iran kindled long-standing fears of an expansion in Middle East violence and possible supply blockages, resulting on Thursday in soaring oil prices for the second time this week - this time on the order of nearly 5 percent.

As of 1:08 p.m. EDT, Brent was up $3.59, or 4.86 percent, at $77.49 per barrel, while West Texas Intermediate crude futures rose $3.58, or 5.11 percent, to $73.68.

The ailing Biden, when asked whether the U.S. would support an Israeli strike on Iranian oil facilities, replied, "We're discussing that; I think that would be a little – anyway…...there's nothing going to happen today."

Daniel Ghali, senior commodity strategist at TD Securities, remarked, "Geopolitical risks in the Middle East are probably at their highest levels since the Gulf War."

Phil Flynn, senior market analyst for Price Futures Group Inc., said, "This is going to really test the mettle of the market because up until now the risk to supply has been downplayed, as there has been no disruption, so this could be a game changer.

"It is raising a lot of bullish questions; the market has got to buckle up its seat belts and get ready for some volatility."

Claudio Galimberti, chief economist at Rystad Energy, pointed out that the saving grace in all of this turmoil is the Organization of the Petroleum Exporting Countries (OPEC), which has a substantial inventory of excess crude and could spring into action if the violence between Israel and Iran escalated.

He said, "This spare capacity is for now preventing runaway prices amid one of the deepest and most pervasive crises in the Middle East in the past four decades."

For his part, Bjarne Schieldrop, chief commodities analyst at SEB, worried that if Israel launches strikes against Iran's oil infrastructure, oil prices could surge to $200 per barrel.

Bloomberg concluded that oil investors "are also preparing for more volatile moves in the days ahead as algorithm-driven traders, who have come to dominate daily market activity, react to developments in the Middle East….while much of crude's recent gain has involved speculators unwinding their record bearish positions, some are now finally making bullish wagers."