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.

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