Brent futures came within a whisker of $120 in early Thursday trading, reaching levels not seen since 2022. The price of crude surged after the US President announced that the Strait of Hormuz will remain closed until Iran agrees to a deal to end its nuclear programme. At the same time, reports emerged that the US military could be preparing for a significant offensive aimed at forcing Tehran to accept the terms proposed by the White House. These latest developments have led traders to price in a scenario in which oil supplies from the Gulf remain disrupted for a prolonged period, effectively keeping around 20% of global crude supply off the market. Against this backdrop, markets are likely to remain highly volatile, with any new developments triggering sharp price swings. However, the path of least resistance for oil prices remains to the upside. Without a realistic prospect of normalisation in the Persian Gulf, the cost of crude may continue to rise the longer the situation persists.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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