LONDON: Oil would initially jump by $15-20 a barrel if Iran blocked the Strait of Hormuz, but prices would ease immediately once U.S. forces engaged, said U.S. consultancy Rapidan, which analyzed scenarios entailing oil flow disruption after a conflict.
Rapidan Energy Group said the oil price reaction would be “M” shaped – suggesting an initial and possibly premature relief sell-off would precede a second spike to higher levels.
Disruption in the strait would likely last longer than the market expected, Rapidan said, as Iran had the means to conduct intermittent but continuing attacks on shipping in the Gulf that could interrupt oil transit “for many weeks, if not longer”.
A seven-day halt in oil flows in the Gulf could raise Brent prices to around $80-90 per barrel, and “well into the triple digits” if the confrontation lasted a month or longer, the energy consultancy said. Brent LCOc1 is currently near $66.50.
Once the conflict ended, prices would slide modestly but maintain a premium of at least $5 on fears of another disruption, the study showed.
A sharp conflict may induce Tehran and Washington to negotiate, in which case prices could fall below pre-disruption levels due to the possible return of millions of barrels of sanctions-hit Iranian oil to the market, the study said.