(Bloomberg) -- Israel’s strike on Iran has injected a fresh bout of geopolitical risk into an oil market that has been in the doldrums due to concerns about the global economy and supply increases from OPEC+.

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Brent crude jumped more than 13% following the attacks, which targeted Iran’s nuclear program and military capabilities, in a major escalation in tensions between two major military powers that risks spiraling into a regional war.

Fears of a glut later this year are now being replaced by calls for higher prices, at least in the short term. Much will depend on Iran’s response and whether key energy assets in the Middle East or tanker traffic through the region are affected.

Here’s what market watchers are saying:

ING

If Iran’s midstream and upstream assets are targeted, as much as 1.7 million barrels per day of export supply could be at risk, “enough to push the oil market from a surplus over the second half of this year into a deficit,” Warren Patterson, head of commodities strategy at ING Groep NV, said in a note. “This scenario could see Brent spiking to $80 a barrel, although we believe prices will likely settle around $75.”

If continued escalation leads to shipping disruptions in the Strait of Hormuz, roughly 14 million barrels per day of oil supply could be at risk, with significant disruptions “enough to push prices to $120 per barrel,” Patterson said. “If disruptions persist towards the end of the year, we could see Brent trading to new record highs, surpassing the record high of close to $150 in 2008.”

Saxo Markets

“Oil could spike toward $80 if Middle East tensions escalate and supply risks materialize, but rising OPEC+ output may cap gains and revive oversupply concerns into autumn,” said Charu Chanana, chief investment strategist at Saxo Markets Ltd. in Singapore.

“A worst-case scenario — such as a closure of the Strait of Hormuz or a disruption to Iran’s 2.1 million barrels per day in exports — could have serious implications for global oil supply and inflation expectations,” she said.

Rystad Energy

Iran’s oil output has recovered since 2019 on higher Chinese buying, with production recently as high as 4 million barrels a day, said Mukesh Sahdev, head of commodities markets - oil at Rystad Energy A/S.

“Iran’s potential retaliation and blockage of the Straits of Hormuz can” pose a risk to crude supplies, he said. Still, “given the stated US goal of negotiation, it is unlikely that the conflict will escalate into a full-blown war.”

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Westpac Banking

“Given that the strikes appear to have been directed more at the Iranian military general staff, including the head of the IRGC and senior nuclear scientists, and that the US was not involved, that suggests that what we saw today was more of a pre-emptive strike and less of a sustained military conflict,” said Robert Rennie, head of commodity and carbon research at Westpac Banking Corp.

“Traders will, however, be super-focused on Iran’s response and how targeted it is on Israel, versus proxy attacks. Risks going into the weekend are very high, and a push above the January highs for crude is very possible.”

“However, bigger picture, we remain of the view that, as we move into the third quarter, we will see prices probing the lower end of the $60 to $65 range, with risks of prices below $60 as we move into the fourth quarter.”

Phillip Nova

“Due to the worsening situation, oil investors appear to be securing more supplies before the weekend,” said Priyanka Sachdeva, senior market analyst for brokerage Phillip Nova Pte in Singapore. “Some technical short-covering may be occurring after a significant rise of 15% in oil prices in June, which has contributed to an upward trend.”

MST Marquee

“The scope of this attack is at the more severe end of the range than most anticipated for any attack,” said Saul Kavonic, an energy analyst at MST Marquee. Iranian retaliation “could see the US and other parties in the region drawn in,” he said.

“The conflict would need to escalate to the point of Iranian retaliation on oil infrastructure in the region before oil supply is actually materially impacted. Iran could hinder up to 20 million barrels per day of oil supply via attacks on infrastructure or limiting passage through the Strait of Hormuz in an extreme scenario. There is no sign of this yet.”

Oil Brokerage

“A threat of war in the Middle East is material to freight rates,” said Anoop Singh, Oil Brokerage Ltd.’s global head of shipping research. “There isn’t a deterministic path to this brewing conflict, however a short-term spike in freight rates is likely.”

At least 15% of the global very-large crude carrier fleet, are in the Middle East Gulf at any given time, with about 20 of them transiting through the Straits of Hormuz each day.

Qisheng Futures

“The crude oil market is projected to have around a $3 to $5 short-term upside potential” based on the market reaction after the earlier two rounds of conflict between Iran and Israel in 2024, said Gao Jian, a Shandong-based analyst at Qisheng Futures Co. Even before the strike, prices have already partially priced in the expectations of escalation.

SDIC Essence Futures

While macroeconomic and supply-demand factors don’t support prices surging further, “investors may consider buying low-cost call options to hedge against extreme geopolitical risks,” said Gao Mingyu, chief energy analyst at SDIC Essence Futures Co. “Once the geopolitical situation becomes clearer, they can then position for short-selling at higher levels.”

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