Oil: Supply shocks lift price risks – BNY

BNY’s Geoff Yu highlights that energy risk dominates markets as Brent crude is expected to trade sustainably above $100, with Saudi facility disruptions and constrained Hormuz shipments tightening supply. Yu notes central banks’ reluctance to tighten into a supply shock, while political pressure over living costs grows. Rising Oil prices are seen reinforcing upside risks to global inflation and weighing on risk appetite.

Middle East shocks tighten supply outlook

"Energy risk continues to dominate. The market is now fully braced for Brent crude to trade above $100/barrel on a sustained basis."

"Saudi Arabia has halted operations at several southern energy facilities after attacks triggered fires and caused injuries, escalating risks to regional oil supply. The strikes follow repeated Houthi attacks on Saudi energy infrastructure, including the 400,000 barrel/day Jazan refinery, which had already been offline since July."

"The disruption comes as shipments through the Strait of Hormuz remain constrained by the U.S.-Iranian conflict, increasing the risk of simultaneous supply losses across key Middle East export routes. Oil prices are consequently moving back toward U$100/barrel."

"The broader backdrop is also deteriorating, with Iran signaling a more aggressive military posture and the Houthis threatening to blockade Saudi oil flows, reinforcing upside risks to energy prices and global inflation."

"Unlike during the spring oil price surge, a stronger policy response is now looking increasingly difficult to avoid, with the Fed likely to lead that adjustment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)