Oil prices could breach US$100 barrier if supply disruptions persist: analysts

[LONDON] Oil prices surged by nearly 10 per cent on Monday (Mar 2) as shipping in the Strait or Hormuz was affected following attacks by the US and Israel over the weekend that killed Iran’s long-serving Supreme Leader Ali Khamenei.

Brent crude futures went up by as much as 13 per cent to above US$82 a barrel, the highest since January 2025, before falling slightly to US$79.80 a barrel – about 9.5 per cent higher – by Monday afternoon.

The majority of oil analysts are expecting a further increase over the coming weeks, with some investment banks and hedge funds predicting that supply disruptions could cause prices to head to US$90 or even US$100 a barrel.

The big question is whether a new democratic Iranian government, whenever one is in place, will raise production and sell oil to global buyers.

There have been reports that a future democratic Iran could produce as much as 3.5 million barrels a day. Currently, Iran produces about 3.3 million barrels, making it the third-largest oil producer in the Organisation of Petroleum Exporting Countries (Opec).

“Our baseline view is that the Iranian leadership changes, or that the regime changes sufficiently as to stop the war within one to two weeks, or the US decides to de-escalate having seen a change in leadership and set back Iran’s missiles and nuclear program over the same timeframe,” Citi analysts wrote in a note to clients on Monday.

For now, there are fears that the powerful Islamic Revolutionary Guards Corp, which supports the current Iranian regime, could bomb the Strait of Hormuz, a route that accounts for roughly a fifth of global oil shipments.

These tankers carry diesel, gasoline and other fuels to major markets in Asia such as China and India, among many others. This key waterway is also the route for around 20 per cent of the world’s liquefied gas.

Morgan Stanley analysts, for instance, are concerned that Iranian bombing and tanker holdups in the Arabian Gulf could cut global supplies by up to 3 million barrels a day.

Higher oil prices would also lead to a rise in inflation, interest rates and a fall in equity prices, they said.

“Markets are acknowledging the seriousness of the conflict, but they are also signalling that, for now, this is a geopolitical shock, not a systemic crisis,” said Priyanka Sachdeva, a senior analyst at Phillip Nova, in a Reuters report on Monday.

The oil market had already seemed to react last Friday in expectation of a war breaking out in the Middle East.

Spot Brent oil prices rose by 25 per cent from December 2025’s lows of around US$60 a barrel to US$73.20. Brent futures quotes for March 2027, however, were trading at between US$67 and US$68. The wide price discount reflected a somewhat optimistic view that any perceived oil shortage would not last.

For the last few months, Opec and the International Energy Agency (IEA) had estimated that oil supplies were well in excess of demand in many parts of Asia and the rest of the world.

The International Energy Agency noted that developed nations’ commercial oil inventories in January amounted to 1.36 billion barrels, more than sufficient to counter any supply disruptions. Saudi Arabia, the largest Opec producer, could also sell more oil, the agency said.

On Monday, however, Saudi Arabia’s state oil giant Saudi Aramco said that the country’s largest refinery, which produces 550,000 barrels per day, was shut as a precautionary measure after a drone strike. It was not clear when it would reopen.