Brent crude hits multi-month highs as the US-Israel conflict with Iran threatens flows through the Strait of Hormuz, a transit route for over 20% of global oil; banks see sustained elevated prices amid mounting geopolitical risk
Global oil prices surged nearly 10 per cent on Monday, climbing to multi-month highs, as escalating military confrontation between the United States, Israel, and Iran triggered fears of prolonged supply disruption through the Strait of Hormuz, a chokepoint that carries more than a fifth of the world’s oil.
Brent crude rose as high as $78.52 per barrel in early trade, reacting to the U.S. and Israeli strikes on Iran that reportedly killed Iran’s Supreme Leader, Ali Khamenei, and Tehran’s retaliatory attacks across the region. Markets are now pricing in a significant geopolitical risk premium, with analysts cautioning that elevated prices could persist for days or longer, depending on how quickly shipping flows normalise.
The Strait of Hormuz, through which an estimated 20–22 million barrels per day transit, has emerged as the focal point of global energy anxiety. Reports of tanker damage and the suspension of crude, fuel, and liquefied natural gas shipments by several shipowners and trading houses have amplified fears that supply continuity may not be guaranteed in the near term. Even partial disruption in this narrow corridor between Iran and Oman can rapidly push up insurance premiums, freight costs, and spot crude prices.
Analysts across major global banks say the current rally reflects not just immediate supply concerns but also a structural repricing of geopolitical risk. Citi expects Brent to trade in the $80–$90 per barrel range over the coming week under its base case, arguing that elevated levels are likely to hold as long as uncertainty over Hormuz flows persists.
The bank, however, notes that prices could retreat toward $70 per barrel if credible de-escalation signals emerge and shipping lanes are restored without sustained interruption.
Goldman Sachs estimates that crude prices currently embed an $18 per barrel real-time risk premium linked to the conflict. The bank suggests that if as much as 50 per cent of Hormuz flows were halted for a month, that premium could moderate to around $4 per barrel, implying that markets are factoring in the possibility of more severe and lasting disruption.
However, Goldman cautions that prices could spike substantially higher if traders begin to demand compensation for the risk of deeper or more prolonged supply shocks.
Energy consultancy Wood Mackenzie has gone further, warning that Brent could potentially exceed $100 per barrel if tanker flows through the Strait are not restored quickly. The firm describes the situation as a “dual supply shock,” noting that not only are current exports through the Strait at risk, but additional volumes from OPEC+ and most of OPEC’s spare capacity typically a key balancing lever in global oil markets—remain effectively inaccessible while the waterway faces disruption.
Although OPEC+ has agreed to raise output by 206,000 barrels per day in April, analysts say that incremental increase may prove insufficient if physical transport routes remain constrained.
Societe Generale, while acknowledging the severity of the risk, suggests that the most probable outcome remains a sharp but temporary spike, followed by partial retracement if markets conclude that supply continuity is credible. Still, even in that scenario, oil prices are expected to remain elevated relative to pre-conflict levels as geopolitical risk becomes more deeply embedded in energy pricing models.
For India, which imports more than 80 per cent of its crude requirements, sustained elevated oil prices could carry significant macroeconomic consequences. Higher crude costs would likely translate into inflationary pressures, strain on oil marketing companies if retail price pass-through is delayed, and potential widening of the current account deficit.
If Brent were to breach the $90–$100 range and remain there, analysts warn that the ripple effects could extend beyond energy markets to global inflation trajectories, central bank policy paths, and emerging market currencies.
For now, traders remain fixated on tanker movements through the Strait of Hormuz—a narrow waterway that has once again become the fulcrum of global economic stability.
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