(Investing)– Fears over possible supply constraints from the Israel-Iran conflict have driven oil prices higher in recent days, although past disruptions do not suggest that crude will stay elevated for a long time, according to analysts at Citigroup (NYSE:C).
Brent crude futures slumped on Friday following the White House’s comments, although the contract is on course to rise for a third consecutive week.
At 08:21 ET (12:21 GMT), Brent crude futures — the price barometer for much of the world’s oil market — had fallen by 3.1% to $76.44 per barrel. The U.S. West Texas Intermediate crude futures for August edged lower to $73.27 per barrel.
Oil prices spiked by nearly 3% on Thursday, although trading volumes were relatively light with U.S. markets closed.
Since the beginning of the Israel-Iran fighting last Friday, oil has broadly gained, with traders fretting that the conflict could spill into the wider Middle East region and possibly disrupt crucial supply flows — particularly in the Strait of Hormuz, which runs along Iran’s southern coast.
In a note to clients, the Citi analysts said that, while past production disruptions have been different, on average, every 1 million barrel per day of impact supply tends to “raise prompt month prices by about 15-20%.”
However, these previous disruptions, which included events like the First Gulf War in 1990 and sanctions on Iran in 2012 and 2018, do not mean that prices will “go up or stay elevated for a long time,” the brokerage flagged.
