Brent Crude Could Surge to $80 on U.S.-Iran Tensions: Barclays

Brent crude oil prices could surge to $80 a barrel if tensions between the United States and Iran lead to significant supply disruptions, Barclays bank said.

The bank's analysis comes as oil prices have already seen upward movement amid concerns about potential supply interruptions, particularly with nuclear talks between the U.S. and Iran remaining unresolved. On Friday, oil prices rose by approximately two percent, with Brent crude settling at $72.48 a barrel.

Barclays cautioned that the oil market is experiencing a structural tightening, characterized by declining spare capacity, dwindling inventories, and robust demand.

According to Barclays, a supply disruption of one million barrels per day would significantly undermine expectations of a widely anticipated supply surplus, thereby pushing Brent prices towards the $80 mark.

However, the bank also noted that if no major supply disruptions occur and Iran's reaction to any potential U.S. strikes remains restrained, oil prices could fall by $3 to $5 per barrel, all other factors being equal.

U.S. President Donald Trump voiced his dissatisfaction on Friday regarding the U.S. negotiations with Iran over its nuclear program, hinting at the possible use of force, amid a substantial military presence in the region which could signal potential strikes against Iran.

“While it is entirely possible that escalation does not lead to supply disruption and a $3-5/bbl risk premium in oil prices quickly fades, a 1 mb/d supply disruption would upend views of a widely anticipated supply surplus and push Brent to $80/bbl,” the bank said.

Barclays stated in a note that dismissing their view that geopolitical tensions continue to pose asymmetric risks to oil prices is primarily based on recent history, which supports the fading of risk premiums surrounding such events.