Rabobank’s Senior Market Strategist Benjamin Picton highlights escalating geopolitical risks around Iran, the Strait of Hormuz and NATO fractures, with direct implications for Oil. He notes infrastructure damage to petrochemical assets, sharply higher WTI and Brent prices, and warns that prolonged closure of the Strait and further US strikes on Iranian infrastructure could prevent a rapid recovery in global Oil supply and demand.

War escalation keeps crude markets tense

"Infrastructure damage is mounting. Israel recently struck Iranian petrochemical infrastructure at the South Pars gas field. Iran retaliated by launching ballistic missile strikes against Saudi Arabia’s Al-Jubail industrial city – the world’s largest petrochemicals production cluster."

"The WTI front future is up 0.7% this morning to $113.15/bbl, while dated-Brent closed at $141.26/bbl on Thursday – highlighting the wide spread between physical crude and the front future ($109.88/bbl), which is now the June contract."

"This puts us firmly back into ‘escalate to de-escalate’ territory, while also pushing us further along the severity spectrum where the Strait remains closed for longer and damage to economic infrastructure means that ‘re-opening’ does not imply any kind of rapid snap-back for the global economy."

"Ukraine has managed to do substantial damage to Russian economic (oil) infrastructure in recent weeks even as the rest of the world is desperate for more oil to come to market."

"As we approach the deadline for escalation a significant ‘what if’ lingers: If the lines between the two conflicts continue to blur and two coalesce into one, who then will say “not our war”?"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)