Oil prices set to climb further as Middle East tensions deepen supply fears

Oil prices are expected to rise further in the coming week, supported by escalating geopolitical tensions in the Middle East and growing signs that supply risks are expanding beyond key transit routes.

Global benchmarks have already surged significantly. Brent crude traded above $112 per barrel, while West Texas Intermediate hovered near $100. The sharp rebound from pre-conflict levels of around $70 highlights how strongly markets are reacting to potential disruptions in energy supply.

The geopolitical situation has intensified across multiple fronts. Iran-backed Houthi forces launched a missile toward Israel for the first time since the conflict began, while Israeli forces escalated strikes in Lebanon, including in Beirut. Additional disruptions were reported at ports and infrastructure across the region, including in Oman, raising alarms over the safety of vital shipping and logistics hubs.

The widening scope of attacks has reinforced fears that the conflict is no longer contained and could begin to directly impact energy flows and industrial operations across the Gulf. The Strait of Hormuz remains central to global oil supply, and any prolonged disruption there could have far-reaching consequences.

Markets briefly found relief following comments by Donald Trump, who extended a deadline to April 6 for Iran to allow oil tankers to pass through the Strait of Hormuz. Investors initially interpreted the move as a possible opening for de-escalation, leading to a temporary easing of prices.

However, that optimism proved short-lived. As trading progressed across global markets, prices resumed their upward trajectory, with continued hostilities and mixed signals from Washington and Tehran fueling uncertainty.

“The diplomatic dissonance this week between the U.S. and Iran dismayed investors,” said Doug Beath. “By the end of the week, risk appetite could not withstand the fog of war.”

Analysts pointed to oil’s ability to hold above key psychological levels as a sign of underlying strength. Fawad Razaqzada noted that crude maintaining levels above $100 reflects sustained upward pressure. “Oil has bounced back to climb above that $100 level… that move builds on gains from the previous session after Iran effectively rejected Trump's proposal for a ceasefire,” he said.

Razaqzada added that geopolitical tensions remain the dominant driver of price action. “If it does escalate, then we're likely to look at significantly higher oil prices and much lower stock markets,” he said, warning that inflation risks are already rising due to higher energy costs.

Market expectations are also shifting toward a prolonged period of elevated prices. Stephen Innes said recent developments have not reduced underlying risks. “The ten-day extension is time bought, not risk reduced, and markets are pricing that distinction,” he explained.

He added that oil’s resilience signals deeper concerns tied to the expanding conflict footprint. “Oil remains the anchor, and its refusal to stay lower signals persistent escalation risk beneath the headlines. The market is shifting from pricing a quick resolution to managing the probability of a longer, structurally embedded conflict.”

While the Strait of Hormuz remains a focal point, recent attacks suggest risks are no longer limited to shipping lanes. Strikes on industrial zones, ports, and logistics hubs have heightened concerns about broader disruptions to energy supply chains across the region.

Analysts say the combination of constrained shipping flows, infrastructure attacks, and lack of diplomatic progress is likely to keep oil prices elevated in the near term. Unless there is a clear and credible de-escalation, markets are expected to remain volatile, with an upward bias in prices in the days ahead.