KEY POINTS
- Oil prices surged above $90 per barrel, rising more than 25% since the Iran conflict escalated, the biggest weekly gain since 2020.
- Production cuts and storage shortages in Gulf oil facilities could force further shutdowns and tighten global supply.
- Escalating tensions in the Strait of Hormuz and damage to LNG infrastructure are raising fears that energy prices could spike to $150 per barrel, fuelling global inflation and market volatility.
Global oil prices have surged past $90 per barrel following the escalating conflict involving Iran, triggering fears of another wave of global inflation.
The international oil benchmark, Brent crude, climbed to $91.89 on Friday, marking its highest level since April 2024.
The price spike represents a more than 25% increase compared to levels before the latest conflict began, when oil was trading around $72.50 per barrel.
Analysts say the sharp rise is the largest weekly jump since April 2020, when oil markets experienced massive volatility during the early stages of the COVID-19 pandemic.
The surge is largely driven by fears that the conflict in the Middle East, a key oil-producing region, could disrupt global supply and tighten already fragile energy markets.
Production and Storage Concerns Add Pressure
Additional pressure on oil prices emerged after reports that Kuwait had begun cutting oil output at some fields due to limited storage capacity. Analysts warn that if storage facilities continue to fill up, producers could be forced to halt production entirely.
Energy consultancy Kpler has warned that oil storage facilities in Saudi Arabia and the United Arab Emirates could reach full capacity within about 20 days. If that happens, producers may have no option but to temporarily shut down extraction, a costly step that could further destabilize supply.
Restarting oil production after such shutdowns can take weeks, raising concerns that any disruption could tighten supply and push prices even higher.
Energy officials in the Gulf have also warned that the situation could worsen significantly if the conflict drags on.
Qatar’s energy minister, Saad al-Kaabi, warned that if the war continues unchecked, Gulf energy exporters may eventually halt production, potentially driving global oil prices as high as $150 per barrel.
The situation is already affecting natural gas markets. A drone strike linked to Iran reportedly damaged a major liquefied natural gas (LNG) export terminal in Qatar. Even if the war ended immediately, al-Kaabi said it could take weeks or months for exports to fully resume.
