Global oil markets are on high alert as escalating conflict between Israel and Iran threatens to push crude prices above $100 a barrel, despite abundant reserves and spare production capacity, analysts warn.
On Friday, oil prices surged up to 14% after Israel launched a large-scale, unprecedented attack on Iranian nuclear and military sites. The sudden escalation rattled global energy markets, prompting fears of prolonged supply disruptions in one of the world’s most oil-sensitive regions.
Over the weekend, U.S. crude (WTI) and Brent closed at $72.98 and $74.23 per barrel respectively, up 7.26% and 7.02%. Should the price rally continue, UAE motorists may feel the pinch at the pumps in the coming month. In June, prices in the UAE remained stable at Dh2.58 for Super 98, Dh2.47 for Special 95, and Dh2.39 for E-Plus.
This is not the first time tensions between Israel and Iran have sparked market fears. In October 2024, Israel’s strike on Iran’s nuclear facilities led to limited drone retaliation. The situation eventually calmed, and markets stabilized — a pattern that could repeat, but analysts caution that this time may be different.
“The market’s response to last night’s attack has been very strong,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “A de-escalation could pull prices back below $70, but a broader escalation could send crude soaring to $90 or even $100 per barrel.”
Naeem Aslam of Zaye Capital warned that a full-scale war is pushing markets into dangerous territory. “We’re staring down a barrel of volatility. If energy infrastructure is targeted, prices could spike past $120. The region’s importance to global oil makes even a brief disruption critical.”
Despite these fears, some analysts argue the surge may be short-lived. Norbert Ruecker of Julius Baer described oil as the “fever gauge” of geopolitical tensions. He believes the market remains fundamentally strong, with ample storage, robust global exports, and over 5% spare production capacity worldwide.
“Our near-term price target is $72.5, and unless the conflict expands dramatically, we expect prices to normalize,” Ruecker said. “A total closure of the Strait of Hormuz is unlikely, though it remains a key risk to monitor.”
Ole Hansen of Saxo Bank echoed that sentiment, noting that over 20 million barrels of crude pass through the Strait daily. “Even a brief disruption could trigger a dramatic price spike,” he warned.
As geopolitical tensions mount, oil prices may continue to swing wildly — driven less by supply shortages and more by fear, uncertainty, and the fragile balance in one of the world’s most volatile regions.
