Global oil prices are continuing to climb, reaching multi-month highs amid ongoing geopolitical tensions. Brent crude surged Tuesday, briefly adding as much as 8% to reach $85 per barrel before partially retracing gains to around $80 per barrel by 10 PM local time – still representing a roughly 3% increase for the day.
The U.S. Benchmark, West Texas Intermediate (WTI), followed a similar trajectory, approaching $78 a barrel during the day before settling around $74. This builds on previous significant price increases, driven primarily by investor concerns that the continuing conflict in the Middle East could disrupt global supply.
“A quick de-escalation of the situation isn’t on the horizon. The Strait of Hormuz remains practically closed and Iran is signaling its readiness to attack energy infrastructure in the region, continuing to set upward pressure on oil prices,” said Tony Sycamore, an analyst at IG, according to Reuters.
Oil is particularly sensitive to geopolitical instability, and the current situation is no exception. Investors are factoring a “risk premium” into prices, reflecting the probability of potential complications or temporary limitations to physical supplies. The Persian Gulf and the Strait of Hormuz, a critical transit point for global oil exports, are key areas of concern.
Millions of Barrels Potentially at Risk
Any indication of restrictions to shipping, attacks on infrastructure, or tightened security measures immediately increases nervousness in the markets. Even without an actual production outage, prices are reacting to the mere risk of disruption.
According to Dominik Rusinko, chief economist at Patria Finance, the current price reaction is relatively moderate given the scale of the conflict. “This signals that the oil market is not yet seriously working with a scenario of prolonged supply disruptions,” he stated.
Photo: TradingView, Seznam Zprávy
Oil prices on world markets continue to rise significantly and remain near multi-month highs. The graph shows the development of Brent oil on the spot market.
Approximately 15 million barrels per day, transported through the Strait of Hormuz, are potentially at risk, which could represent the largest supply disruption in history, according to Rusinko. “That’s why we are closely monitoring traffic in the Strait of Hormuz, the most important chokepoint in energy markets,” he added.
Shipping and Insurance Costs
Another factor is rising shipping costs and insurance for tankers. If carriers avoid risky routes or have to pay higher premiums, this is reflected in the overall delivery price. Rusinko as well points out that traffic through the Strait of Hormuz has already decreased significantly, not due to direct Iranian attacks, but due to preventative measures and a sharp increase in tanker insurance.
Prices at the Pump
- Following the start of the conflict in the Middle East, the increase in oil prices is beginning to be reflected in Czech gas station price lists.
- In the event of supply restrictions, analysts do not rule out a sharp increase of up to five crowns per liter.
The market is also monitoring not only crude oil itself, but also the prices of oil products, such as diesel and gasoline. If they are rising faster than oil, it signals concerns about tensions in the refining and distribution chain.
Optimism isn’t being boosted by latest analyst estimates. Bernstein this week raised its forecast for the average Brent oil price for this year to $80 per barrel, significantly more than the previous $65.
The firm also warned that in the event of a prolonged and escalating conflict, the price could rise to between $120 and $150 per barrel. Such a scenario would mean not only a significant increase in fuel prices, but also broader inflationary pressures in the global economy.
For European and Czech consumers, developments in the oil market are crucial, particularly due to fuel prices. These usually react with a certain delay, but if higher oil prices persist, an increase at gas stations would be inevitable. Higher energy prices could also complicate the fight against inflation and affect expectations regarding interest rates.
“Expensive energy is a new inflationary risk on the scene that could lead the CNB to be even more cautious, including when considering a slight decrease in rates,” Rusinko believes.
He also recalls the recent experience with high inflation, accompanied by a significant increase in inflation expectations among households. These are sensitive to prices visible on gas station totems, and therefore the risk of inflation expectations breaking away from the central bank’s target and developing in an unfavorable direction is now growing again.
