(Bloomberg) -- The oil market has “relaxed too quickly” over risks in the Middle East, and renewed hostilities between Israel and Iran after the US election could boost prices, according to Standard Chartered Plc.
“We see the risk of an escalating series of attacks over an extended period, with no immediate prospect of either military or diplomatic resolution,” analysts including Emily Ashford and Paul Horsnell said in an Oct. 29 report. The two-month period leading up to the presidential inauguration on Jan. 20 represents a potential “window for an intensification,” they said.
Crude prices slumped by the most in more than two years on Monday after Israel’s latest retaliatory strike against Iran avoided the OPEC producer’s energy infrastructure. That choice of targets both reduced concerns about immediate risks to crude flows, and flipped investors’ attention back toward expectations for deteriorating global oil balances in 2025.
“There has been a trend over the past year for the market to act as if every escalation in Middle East geopolitical risk is a de-escalation,” the analysts wrote. At present, Israel does not appear to have completed many of its objectives in Iran, and the scope for further action “is likely to widen significantly as soon as voting has concluded in the US election,” they said.
Global benchmark Brent was forecast at $89 a barrel in the first quarter of 2025, with West Texas Intermediate seen at $86, according to Standard Chartered. Brent last traded above $71, down by more than 7% this year.
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