Barclays said on Friday that Brent crude could potentially test $120 a barrel if the Middle East conflict persists for another couple of weeks.
“These numbers might seem too high, especially given widespread pessimism about the oil market outlook heading into this year, but we reiterate that fundamentals are stronger and risks are bigger than the Russia-Ukraine conflict, when we saw these levels materialize,” Barclays added.
Oil prices have jumped sharply as the widening U.S.-Israeli conflict with Iran has effectively closed the Strait of Hormuz, constraining Middle East supplies.
Shipping through the Strait of Hormuz, which carries about a fifth of global oil and oil and liquefied natural gas, has been disrupted after Iran threatened to fire on passing vessels.
Brent crude futures were trading around $93.60 per barrel and West Texas Intermediate were at $91.62 as of 1857 GMT.
Barclays said oil volumes stranded on tankers in the Middle East Gulf have risen by about 85 million barrels since the conflict began, adding that risks to oil prices remain skewed to the upside.
U.S. President Donald Trump demanded Iran’s “unconditional surrender” on Friday, a dramatic escalation of his demands a week into the war he launched alongside Israel, which could make it more difficult to negotiate a swift end to hostilities.
“Production shut-ins in Iraq and Kuwait are already happening and might spread to UAE and even Saudi Arabia over time,” Barclays said.
Barclays said the far-end 10% scenario now implies Brent could hit $150 a barrel before the end of the month.
(Reporting by Anushree Mukherjee and Anmol Choubey in Bengaluru; Editing by Mark Porter and Chizu Nomiyama)