Oil prices expected to rise when trading resumes

• Markets open on Monday morning
• Iran claims Strait of Hormuz is closed
• 20% of global oil transits through strait

Oil futures prices will probably rise when markets resume trading in the early hours of Monday although the increase will be limited, experts predict, after the United States and Israel launched deadly attacks on Iran.

Iran’s Islamic Revolutionary Guard Corps broadcast radio messages on Saturday claiming the Strait of Hormuz was closed to vessels following the strikes, which prompted retaliatory attacks by Tehran across the region, including targets in Saudi Arabia, Qatar, the UAE and Bahrain

About 20 percent of global oil supplies transit through the Strait, according to the US government. The channel marks the entrance to the Gulf and is bordered by Iran to the north and Oman’s Musandam peninsula to the south. At its narrowest point, the Strait is about 21 miles (34km) wide, although navigable shipping lanes are only 3km across.

Ship tracking websites showed that few tankers were near the Strait on Sunday.

“I’m expecting a bit of a price jump, an increase of a few dollars, but not a huge spike. A lot of the price action was already baked in,” said Robin Mills, chief executive of Dubai-based consultancy Qamar Energy and an AGBI columnist.

“Tankers will be cautious for a couple of days, and insurance premiums have risen, but if there’s no damage to tankers and no direct threat, they’ll conclude that they should proceed, particularly state-owned ships.

“Iran saying it has closed the Strait won’t be taken as a binding instruction unless there’s some kind of attack on a ship.”

Charu Chanana, chief investment strategist at Saxo Bank, also expects oil prices to open higher, but, “the move may not fade quickly because the market is not only pricing barrels but also pricing the cost of moving barrels.”

“Even without a full shutdown (of the Strait of Hormuz), higher war-risk premiums, rerouting and insurance repricing can keep crude and freight costs elevated,” Chanana added.

“With the entire Gulf region impacted, unwinding this geopolitical risk premium may take time, particularly given the region’s central role in global energy supply.” 

West Texas Intermediate (WTI) oil futures, the world’s most traded oil contract, will open for pre-trade at 0200 UAE time on Monday. It ended Friday at $67 per barrel, up 17 percent this year but down 4 percent over the past 12 months.

“The impact on oil prices of the US and Israeli air strikes on Iran and its retaliation depends on whether oil infrastructure – for production or export – is targeted in this conflict,” said Edward Bell, chief economist and head of research at Dubai’s biggest bank Emirates NBD.

“At present, it does not appear that oil output has been hit anywhere but markets were nevertheless primed for geopolitical risk and an upside move in prices is likely.”

Currently, oil markets are oversupplied. Global demand will be 106.5 million barrels per day (bpd) this year, up from 105.1 million bpd in 2025, Opec forecasts, while output will increase by 2.4 million bpd to 108.6 million bpd over the same period, the International Energy Agency estimates.

The eight Opec+ members – which include Saudi Arabia, Iraq, UAE, Kuwait and Oman – on Sunday said they would raise production by a combined 206,000 barrels in April as part of the ongoing unwinding of previous output cuts. 

Shares in Saudi Aramco, the world’s largest listed oil company, were up 2.6 percent at 1510 local time on Sunday.