- Oil benchmarks surge over 15% since Monday on supply fears
- Spiking energy prices have fueled inflation fears
- Cooling Fed cut bets could hit equity markets
- Brent firmly bullish with $90and $100 acting as key levels of interest
Brent oil has rallied as much as 17% since Monday, pushing 2026 gains to 35%.
Why:
- Iran conflict: Global oil markets have been thrown into turmoil by the US and Israeli war against Iran. This has halted trade, driven producers to lock output and forced the closure of a major refinery part.
- Closure of the Strait of Hormuz: This is a narrow waterway that connects the Persian Gulf to the Indian Ocean where around 20% of the world’s oil passes through. Iran has effectively closed this passage – warning that any vessel that passes would be set “ablaze”.
What does this mean?
- Consumer pain: A sustained rise in oil prices could be bad news for consumers as the cost of petrol and domestic energy bills increases.
- Inflation fears: Aggressively rising energy prices may raise inflationary fears, forcing markets to push back against rate-cut expectations.
- Return of equity bears: This domino effect may hit global stocks which have been benefiting from the prospect of lower rates in 2026.
Potential scenarios
Bullish Scenario: The direct military escalation in the Middle East has led to the closure of the Strait of Hormuz. Any supply shock could drive Brent toward $90 and $100.
Bearish Scenario: Easing tensions or the re-opening of the Strait of Hormuz may cool supple-side fears. A break below the $78 support could trigger a sell-off toward $75 for Brent.
