In Brief

How high will oil prices rise after Iran attack?

Brent crude breaches $70 mark and prolonged conflict could send it higher

Oil prices have climbed above $70 a barrel on fears of retaliation by Tehran for the assassination of the Iranian general Qasem Soleimani in a drone strike in Iraq.

Brent crude rose 2% to hit an eight-month high of $70.73 a barrel in Asian trading yesterday - a level not seen since last autumn when it surged briefly following an attack on a Saudi processing complex. The rise extended gains on Friday following the drone attack.  

Investors fear that further conflict could disrupt oil supplies, says The Times, because the Middle East accounts for nearly half of the world’s oil production, while a fifth of the world’s oil shipments pass through the Strait of Hormuz.

Will oil prices continue to rise?

Commentators at Citibank expect prices to stay high because of fears over a retaliation and the BBC points out that “attacks on US oil company pipelines, or where Western and American oil companies have invested in new exploration, would drive crude higher”.

Analysts at ING point out the tension risks “disruptions to oil supply in the Middle East, be it through the Iranians disrupting Strait of Hormuz oil flows, or through attacking energy infrastructure of US allies in the region”.

However, cautions CNN, other analysts said that they expect a limited response that won't significantly disrupt crude supplies, keeping a lid on oil prices.

Paul Donovan, the chief economist at UBS Global Wealth Management, told The Guardian that the global market’s focus on the oil price after the attack is “a rather 1970s reaction” that is “perhaps not appropriate for 2020”.

Any resolution of the conflict between Iran and the US will de-escalate the situation and prices will deflate, they say.

Will the rise affect petrol prices?

The RAC says a prolonged oil price rally would add “at least 2p” per litre to the price of petrol, weeks after the first rise in six months in December.

–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Start your trial subscription today –––––––––––––––––––––––––––––––

Recommended

Global oil storage almost ‘overwhelmed’ as price plummets
A flame torch at the Total refinery in Donges, western France
In Depth

Global oil storage almost ‘overwhelmed’ as price plummets

Oil prices plunge as Russia feuds with Saudi Arabia
A Kuwaiti trader checks stock prices at Boursa Kuwait in Kuwait City, on March 8, 2020. - Kuwait Boursa authorities stopped trading after the Premier Index slumped 10 percent while the All-Sh
In Depth

Oil prices plunge as Russia feuds with Saudi Arabia

Tory MPs warn Rishi Sunak against ‘historic tax grab’
gettyimages-1228294295_cropped.jpg
In Depth

Tory MPs warn Rishi Sunak against ‘historic tax grab’

Sunak to spend £2bn to help young beat Covid jobs crisis
Rishi Sunak
In Depth

Sunak to spend £2bn to help young beat Covid jobs crisis

Popular articles

Best TV crime dramas to watch in 2021
Line of Duty series six returns to BBC One in 2021
In Depth

Best TV crime dramas to watch in 2021

Who are the richest people in the world?
Elon Musk
In Focus

Who are the richest people in the world?

Ten Things You Need to Know Today: 22 Jan 2021
10 Downing Street
Daily Briefing

Ten Things You Need to Know Today: 22 Jan 2021

Free 6 issue trial then continue to