Israel's overnight airstrikes on Iranian nuclear and military sites have sent shockwaves through global energy markets, driving the entire forward curve for crude oil higher - most sharply at the front end - as traders brace for potential supply disruptions. Freight rates also spiked amid rising concerns over maritime security, with fears of Iranian retaliation threatening critical maritime chokepoints like the Strait of Hormuz in the Gulf region.
Earlier, UBS analyst Dominic Ellis commented on the impact Israel Defense Forces strikes on Iran had on global crude markets:
Israeli strikes overnight on Iran have shifted the whole forward curve for oil up, with a more extreme move in the front end as markets weigh the risk of disruption to global crude flows. Iran's production and export infrastructure do not appear to have been damaged, though there are some reports of damage to refineries.
The sense that it's the early stages of what could be a protracted conflict will add $3-5/b of geopolitical risk premium to oil even without physical disruption to flows in my view. OPEC has 5mb/d of spare capacity, of which 1mb/d incremental was coming back anyway with the planned unwind of production cuts, though the conflict could escalate in a way that limits the potential impact of some of the OPEC spare capacity. It's hard to know how the situation develops, but I'd expect oil price forecasts to be raised, with positive implications for oil sector EPS.
