Sure, oil prices have soared since attacks on Iran and counterstrikes began — but it's also possible the market isn't freaking out enough.
Why it matters: Consumers and companies worldwide will feel the effects of the conflict that's pushing up petroleum and natural gas prices.
- But oil hasn't yet approached the $100-per-barrel — or higher — level that numerous market-watchers say is possible in the unpredictable, expanding regional battle.
The intrigue: Veteran analyst Bob McNally sees a mismatch between risk and oil prices, and believes the market remains too complacent despite the recent rise.
- The president of Rapidan Energy Group points to years of geopolitical crises that didn't bring large-scale disruptions to oil supply, including last summer's U.S. bombing of Iran's nuclear sites and Russia's invasion of Ukraine.
- There's a "boy who cried wolf effect," McNally said.
State of play: The global benchmark Brent crude is currently trading around $81 per barrel, up 11% since markets reopened Sunday night — a sharp but not catastrophic spike.
- It hit $85 earlier Tuesday for the first time since 2024 before falling back.
- "At this stage, we view oil prices as a lagging rather than a leading indicator of the potential supply shock risk posed by an extended conflict," RBC Capital Markets said in a note earlier this week.
Threat level: Tanker traffic through the Strait of Hormuz — which handles a whopping fourth of the world's seaborne oil — has vastly reduced.
- And the battle expanded this week to reach other energy infrastructure. Debris from an intercepted drone strike damaged Saudi Arabia's huge Ras Tanura refinery, the kingdom's state news agency said.
- QatarEnergy halted LNG production, citing military attacks on its major Ras Laffan export site.
The big picture: McNally notes that Brent soared to over $120 per barrel within weeks of Russia invading Ukraine in early 2022.
- Russia's oil exports were roughly a fifth of what moves through Hormuz, yet the current price rise is more muted, he points out.
"We've just seen, over and over again, where you have these geopolitical events that momentarily put a spike in crude. They threaten some supply reduction, but no supply reduction actually happens, and the spike reverses," he said.
- And McNally sees another reason for the relative chill right now. "I think there's strong and deep and widely held belief ... that the U.S. military will not allow the Strait of Hormuz to remain blocked for very long."
- He predicts oil heading to $100 if the Strait isn't open soon, and argues Iran has the ability to prevent transit for longer than the market expects.
Zoom out: "The market has been tuning out geopolitical risk for years," oil scholar Ben Cahill said via email, referring to last summer's Israel-Iran conflict.
- "You can second-guess it or call it naive, but the fact is that until now, traders have been vindicated," said Cahill, a senior associate with the Center for Strategic & International Studies.
- "But the mood is finally starting to shift, after the sustained shipping disruptions and the attacks on Ras Tanura and Ras Laffana," he said.
What we're watching: Some other energy commodities like gasoil — which is similar to diesel — are spiking more. European natural gas futures surged due to Qatar's LNG halt and the Hormuz situation.
- RBC sees oil reaching over $100 per barrel in a "prolonged conflict" scenario, and analysts also see spikes to triple digits in the event of major, successful attacks on Gulf countries' oil producing and shipping sites.
