Oil can once again compete as liquid gold.
Crude oil futures (CL=F) rose 9% last week, their biggest weekly gain since March 2023, boosted by rising tensions in the Middle East.
Israel’s pledge to retaliate against Iran’s missile attack has prompted more traders to bet on $100 oil, pushing bullish bets on Brent crude oil to a five-week high.
I had the opportunity to speak with Rystad Energy Claudio Galimberti, who told me that traders are “clearly factoring in the risk of a major supply disruption” as tensions in the Middle East rise to “one of the highest levels in four decades.”
Iran is a major player in the global oil market, producing more than three million barrels of oil per day, so the growing risk of a supply disruption could be a “big tailwind for prices” in the short term. , according to Blue Line Futures. Bill Baruch.
“That will cause crude oil prices to rise significantly. “That changes the rules of the game,” Baruch warned.
If you’re looking for ways to protect yourself against supply disruption risk, Galimberti sees Exxon Mobil (XOM), Chevron (CVX) and Shell (SHEL) among the “clear beneficiaries” due to their limited exposure to the Middle East.
Judging by stock moves last week, it appears Wall Street agrees. Exxon shares rose 7.8% to an all-time high, while Chevron rose 3.6%.
Wall Street has been trying to assess the risk of a possible broader conflict. One scenario being discussed is the possible blockage of the Strait of Hormuz, a critical passage and center for the global oil market, which represents almost 30% of global oil trade.
It’s a potential threat that Wall Street professionals will monitor closely in the coming days.
Goldman Sachs’ Jenny Grimberg echoed the growing risk of significant disruption, writing in a note last week that “the biggest impacts of the conflict will likely come through a disruption in energy supplies, and a possible shutdown of the Strait of Hormuz would likely lead to “A significant further rise in oil prices, which, in turn, could put new upward pressure on inflation and weigh on growth.”
Goldman estimates Brent could peak at around $90 a barrel if OPEC acts to quickly make up for a six-month outage of 2 million barrels a day. However, if OPEC does not act to cushion the deficit, the team predicts prices will peak around $90.
And experts warn that the consequences of any new escalation in the Middle East could extend far beyond the energy market. Paul Christopher of the Wells Fargo Investment Institute says a broader conflict will prompt investors to reposition themselves in “perceived safe havens.”
“It is likely to cause an appreciation of the US dollar, the Japanese yen and the Swiss franc; higher commodity and 10-year US Treasury bond prices; and lower stock markets,” Christopher wrote in a note to a client last week.
Sean Smith is an anchor on Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Advice on deals, mergers, activist situations or anything else? Send an email to seanasmith@yahooinc.com.
Click here for an in-depth analysis of the latest stock market news and events influencing stock prices.
Read the latest financial and business news from Yahoo Finance