Brent Crude Jumps as Middle East Conflict Hits Oil Flows

Key Moments

War Tensions Drive Sharp Move in Oil

Danske Bank’s Danske Research Team reports a pronounced spike in oil prices as tensions in the Middle East intensify, with Brent crude quoted at USD 116/bbl. The move reflects mounting supply concerns as the conflict affects critical production and transport infrastructure.

Analysts at the bank emphasize that the current upswing in crude prices is closely tied to escalating war risk, noting that oil prices may continue to advance as long as hostilities persist. At the same time, they flag that a restart of flows through key shipping routes could set the stage for a pullback.

Details of the Supply Shock

Under the heading “War-driven supply shock lifts Brent,” Danske Bank describes the recent market dynamics:

“Last week saw a sharp increase in oil and gas prices following the developments in the Middle East. Overnight, oil prices continued to increase with Brent crude up 25% to USD 116/bbl.”

The research team links the move directly to disruptions arising from the conflict:

“The increase follows the developments over the weekend in the Middle East, where producers have started to shut down production amid the halt of traffic through the Strait of Hormuz and a large oil depot in Iran was hit.”

Comparison With Previous Energy Market Stress

Danske Bank’s analysts compare the current surge in prices to a prior episode of geopolitical turmoil affecting energy markets:

“The pace of the price increase and the level of prices are reminiscent of the developments in 2022, when Russia attacked Ukraine. Then US sold strategic reserves to help cap the price increase. It will likely take similar action although, it will not be able to replace all the oil shutdown in the Middle East. It further raises the pressure on the US to finish the war to cool energy markets.”

The team underscores that the present combination of supply constraints and geopolitical uncertainty stands out in its intensity:

“The current situation is unprecedented, and we stress that the oil price may rise further as the war continues.”

Focus on the Strait of Hormuz

According to Danske Bank, the future trajectory of crude prices hinges heavily on developments around a key maritime chokepoint:

“The key point for the oil market and a reversal of prices is still a potential resumption of shipments through the Strait of Hormuz.”

The bank’s assessment suggests that any normalization of traffic through this route would be central to easing the current supply shock and could catalyze a reversal in Brent prices.

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