Oil will exceed $100 if tensions in the Middle East escalate

Madrid.- The Brent crude oil barrel, the benchmark in Europe, will exceed 100 dollars if the tension in the Middle East due to the war in Iran increases and a prolonged blockade of the Strait of Hormuz occurs, however, "for the moment" experts are confident that they will not reach that extreme. Despite the death of the Supreme Leader, Ayatollah Ali Khamenei, there has not been a regime change in Iran like the one in Venezuela, so the big question remains who will be appointed successor because with another hardline leader the likelihood of the conflict being prolonged would increase. Oil prices will continue to be a key indicator of how markets value the situation. In a base scenario, analysts think that the Brent barrel would be between $80 and $95, while the WTI of Texas, a guide for the United States, would remain relatively contained thanks to the country's exporting status and the flexibility of its domestic supply.

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Possible Scenarios

In that case, the mechanism for transmitting oil prices to US inflation would be more moderate compared to previous conflicts in the Gulf, and the impact on prices would be more intense for Europe and Asia, given their dependence on maritime crude from the Middle East. Everything would be complicated in a scenario of progressive escalation of the conflict, without the collapse of the Iranian regime and in which the Islamic republic would launch larger missiles against Qatar, Bahrain and the United Arab Emirates and in which energy facilities in the Gulf or oil tankers would become targets. Oil would move in a range of 90 to 110 dollars, driven mainly by Brent and insurance costs for maritime transport in the Gulf would skyrocket. Even in this context, Fidelity adds, the US oil market would predictably remain relatively more anchored than international indices. The third scenario, for the moment the least likely, is a prolonged closure of the Strait of Hormuz to test the survival of the Iranian regime, as an attempt to dismantle the country's command structure. In that case, Iran could mine the Strait, capture oil tankers, or launch missile and drone attacks against vessels in transit, which would cause oil to exceed $120 as an initial market reaction. At that point, it is "likely" that the main oil-consuming nations will resort to their strategic reserves and China would become a particularly active diplomatic player, given its dependence on supplies from the Gulf, adds Fidelity.

Last Scenario

This remains the ultimate scenario because it is very detrimental to the economic and survival interests of the Iranian regime itself, which has never executed a total closure of the Strait of Hormuz, which would have a rapid and forceful naval response from the United States. Historically, the US dollar has performed well in these types of conflict situations, although this is no longer necessarily a guaranteed outcome, experts warn, who continue to see gold as a safe haven for investors.

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Investor diversification will remain key even if the tension in the Middle East ends up being prolonged over time. In the stock market, although markets will likely react with greater short-term volatility to risk assets, the main thesis is that there is still upside potential, unless the energy supply disruption is "persistent and structural". In fixed income, a "typical" movement of seeking quality assets such as sovereign debt with the highest credit rating is to be expected.