Oil Prices Could Surge if US-Iran Conflict Escalates, Fesharaki Warns

According to a well-known energy analyst, Fereidun Fesharaki, there is a possibility of a significant increase in global oil prices in case the current tension between the US and Iran escalates into a full-blown war. The experienced oil market strategist has warned that increasing military threats within the Middle East could lead to disruption of the most important crude transportation systems and hence result into massive upsurge in global energy prices.

Fesharaki, who chairs energy consultancy FGE, noted that although the current risk premium in the oil markets is under control, any such risk could explode with a face-to-face confrontation. “In case there is an indication that U.S. is going to war with Iran, then the oil markets will react very fast,” he said in his recent industry commentary.

Strait of Hormuz at Center of Oil Market Concerns

The focus of market unease lies on Strait of Hormuz; this is a thin strip of water where approximately one fifth of daily global oil supply passes through. A disruption in Gulf’s tanker traffic could take away millions of barrels per day from the world’s supply, thus increasing Brent crude and West Texas Intermediate futures prices through supply tightening.

Energy traders are closely monitoring military movements-and diplomatic signals, as the Middle East remains one of the world’s most strategically sensitive oil-producing regions. Iran is a major-oil producer, and broader regional instability could also impact output from neighboring Gulf nations.

Potential Oil Price Surge and Economic Impact

Analysts predict that under a worst-case scenario characterized by prolonged military conflict, there may be a very high rise in oil prices above what is currently experienced thereby worsening inflation across the globe. Increased crude prices usually lead to higher gasoline, diesel, as well as jet fuel costs that are felt by both consumers and enterprises.

Although international petroleum reserves are quite steady at present, they remain exposed to sudden geopolitical disturbances. Energy markets have always been known to respond dramatically towards conflicts especially when there are threats posed on shipping lines or production sites.

Market Reaction and Risk Premium

At present, it seems like the oil markets do not anticipate much escalation risk being factored into prices. Nevertheless, Fesharaki stressed that this sentiment could change at any moment. Even credible threats against shipping routes or export terminals might add considerable geopolitical risk premium on crude benchmarks.

Investors are considering wider macroeconomic issues such as global demand trends and OPEC+ production policies amidst increasing geopolitical risks.

What Happens Next

Diplomatic efforts continue while military analysts warn that public statements do not always translate into immediate actions. Nonetheless, energy traders expect volatility ahead.

A further escalation in tensions between Washington and Tehran could lead to renewed turbulence in global oil markets. As pointed out by Fesharaki, just the slightest hint of war could make crude prices skyrocket.