Crude oil may top USD 100 on West Asia conflict: ICICI Bank report

An ICICI Bank report projects crude oil prices could surpass USD 100/barrel if the West Asia conflict disrupts oil infrastructure. Prices are expected to trade between USD 75-95, with risks skewed towards the higher end due to the conflict.

Crude oil prices may surge above the USD 100 per barrel threshold if there is any structural disruption to oil infrastructure amid the ongoing military escalations in West Asia, according to a report by ICICI Bank. The report stated that Brent crude prices are expected to trade in the USD 75 per barrel to USD 95 per barrel range in the near term, with risks that oil prices could move towards the higher end of this range.

"The risks of a possible break above USD 100 per barrel threshold remain in place if there is a structural disruption to oil infrastructure," the report said. The crude oil prices are currently trading at USD 78.52 per barrel at the time of filing this report.

Geopolitical Tensions and Supply Risks

Geo-political tensions have escalated substantially after the US and Israel launched military strikes on Iran to engineer regime change. Iran has also retaliated by targeting military bases, civilian areas and oil infrastructure across the Gulf region. The report noted that the conflict is unlikely to abate quickly.

It further highlighted that the ongoing conflict, along with the prospect of a blockade of the Strait of Hormuz, could raise concerns about a sharp spike emerging in energy prices. The Strait of Hormuz is a key route for global oil shipments and any disruption could have significant implications for global supply.

Over the weekend, the US and Israel launched a series of military strikes on Iran as negotiations over a nuclear deal did not show significant progress. The combined forces targeted military infrastructure, including Revolutionary Guard command centres, air defences, missile launch sites and airfields. The attacks reportedly killed Iran's Supreme Leader Ayatollah Ali Khamenei.

Economic Fallout and Outlook

ICICI Bank said it has built in the possibility of the escalation continuing for about a month or so, with risks of a more prolonged war setting in. However, the duration of the conflict remains uncertain at present.

The report warned that the longer the crisis lingers, the more adverse the global macroeconomic landscape could become, with growth expected to slow and upside risks to inflation increasing for all major economies.

Impact on India

For a net-oil importing country such as India, the impact could be pronounced in terms of inflation, growth and the current account balance, the report added.

Historical Context on Price Hikes

The report also noted that in past episodes when a major oil-producing country has faced conflict, energy prices have risen anywhere between 10 per cent to 90 per cent, depending on the duration and intensity of the event.

The medium-term impact on oil prices over one-year or two-year horizons post the event can vary and remains contingent on the overall demand-supply dynamics prevailing after the crisis period. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)