StanChart Warns Oil Is Now Built for Sharper, More Frequent Spikes

Oil prices surged to nearly $110 per barrel, marking the highest level since July, due to the ongoing conflict between the United States and Iran in the Middle East. The Islamic Revolutionary Guard Corps (IRGC) attacked eight oil tankers and two U.S. Navy destroyers in the Strait of Hormuz, retaliating against the U.S. military destroying five IRGC-linked oil tankers in the Gulf of Oman.

Despite these attacks, hopes for a quick resolution to the war have diminished, with U.S. President Donald Trump stating the conflict is unlikely to end before the midterm elections in November. Analysts at Standard Chartered predict that the sharp oil price fluctuations will persist through the third quarter, as diplomatic progress remains limited.

The bank forecasts that oil will average $77.50 per barrel in 2027, driven by returning demand from China and the need to fill and expand depleted strategic reserves. The ongoing conflict has resulted in increased volatility, with oil markets becoming increasingly vulnerable to price spikes. Oil and commodity analysts at StanChart expect middle distillates, such as diesel, gasoil, and jet fuel, to outperform gasoline due to the strength in these prices.

Meanwhile, Europe's natural gas prices have risen above 81/MWh, the highest level since December 2022, largely due to the Middle East disruptions. The Qatar-loaded LNG carrier sailed through Hormuz on September 8th, bound for Pakistan, signaling potential feasibility for resumed exports through the Strait of Hormuz. However, substantial uncertainty remains regarding whether this represents the beginning of sustained exports.