Iran war panic buying pushes oil prices to four-year peak

• Buyers scramble for supplies
• Hopes IEA will release reserves
• Kuwait and Iraq cut production

Oil prices surged to four-year highs on Monday as production shut-ins linked to the near-closure of the Strait of Hormuz sent buyers scrambling to secure supplies.

The spiralling conflict triggered panic buying on crude markets, say analysts, after Iran all but halted oil and gas tanker transit through the Strait of Hormuz and struck civilian military infrastructure across the Gulf.

Brent crude was trading at $103 a barrel at 12:24 GMT on Monday, up 11 percent on Friday’s close. It hit a peak of more than $119 in early morning trading, its highest price since June 2022.

It has since retreated somewhat on hopes that sovereign members of the International Energy Agency, which are obliged to hold at least 90 days of net oil imports in reserves, may release some supply.

Monday’s crude price increase was due to “a continued and massive disruption to global energy flows”, said Ole Hansen, Saxo Bank’s head of commodity strategy, citing Brent’s surge to $140 in 2022 following Russia’s invasion of Ukraine.

“Given the much worse impact on supply from the current disruption, any lack of progress can send prices much higher, potentially above $140,” said Hansen.

Kuwait began reducing oil output on Saturday, while Iraq has cut production by 2.5 million barrels per day.

Abu Dhabi National Oil Company has also lowered output, according to media reports, although a company statement was more ambiguous, stating that Adnoc is “carefully managing offshore production levels to address storage requirements”.

“Production shut-ins across Iraq and Kuwait are providing tangible justification for prices to rise as global crude balances tighten enormously and the scramble to provide Asian refineries with even minimum levels of crude to operate becomes more real,” Philip Jones-Lux, a senior analyst at Singapore’s Sparta Commodities, wrote in a note.

Over the weekend, Al Jazeera reported that Israel bombed fuel depots in Tehran, while Iran struck Israel’s Haifa refinery. This demonstrates that energy infrastructure is “now firmly a target for both sides”, said Felipe Elink Schuurman, CEO of Sparta Commodities.

It would take two months from the Strait of Hormuz reopening for oil refining supply chains to normalise, according to Schuurman.

West Texas Intermediate oil futures, the world’s most traded oil contract, was up 11 percent at $101 a barrel as of 12:21 GMT on Monday. It has retreated from an intraday peak of just over $119, its highest level since June 2022.