Oil prices surged by 8% overnight, is it just the beginning? The market holds its breath and watches the safety of the Strait of Hormuz.

When Israeli warplanes cut through the Tehran night sky, the nerves of the global energy market instantly tightened. Israeli airstrikes on Iranian nuclear facilities and military targets caused violent fluctuations in the global crude oil market. On Friday, WTI crude oil surged nearly 8% to $74 per barrel, with the entire futures curve skyrocketing. And this may just be the beginning. If the global 20% oil lifeline of the Strait of Hormuz is threatened, investors will face a true energy crisis. Geopolitical conflicts ignite supply concerns, causing oil price risk premiums to surge The attack on Iran caused the entire crude oil futures curve to rise, with the front-end contracts showing the most significant gains, reflecting the market's strong concerns about short-term supply disruptions. UBS analyst Dominic Ellis commented that "Israel's nighttime attack on Iran caused the entire oil futures curve to shift upward, with more extreme fluctuations at the front end, as the market weighs the risk of a global oil flow interruption." While Iran's production and export infrastructure seems to be unaffected, there are reports of some level of damage to refineries. Ellis further analyzed, "This conflict may feel prolonged, and even without actual supply disruptions, it could add a $3-5 per barrel geopolitical risk premium to oil." This assessment highlights the market's deep concerns about the escalation of the situation. Goldman Sachs analyst Thomas Evans listed four key focus points that the market is currently concerned about in a report to clients: the scale of Iran's reaction (including proxy activities), statements from U.S. officials and Trump today, the extent of damage to Iranian nuclear facilities, and Israel's potential subsequent strikes. Evans emphasized in particular, "Energy risks are clearly concentrated in the Strait of Hormuz, as well as threats to Iran's domestic oil fields (accounting for about 3.5% of global production) and refining infrastructure. The Strait of Hormuz carries about 20% of global oil and liquefied natural gas flow, and Goldman Sachs research historically predicts that if this channel is interrupted, oil prices will rise by 25%." The freight market's response was equally strong. According to data from brokerage firm Marex Group cited by Bloomberg, forward freight agreements for shipping crude oil from the Middle East to Asia in July surged 15% to $12.83 per metric ton. Can OPEC's spare capacity fill the gap? The Strait of Hormuz becomes a critical variable Although the geopolitical tensions have pushed oil prices higher, analysts also point out that OPEC's spare capacity provides the market with some cushion. However, the effectiveness of this "safety valve" may be severely constrained by the threat to maritime shipping channels. Ellis pointed out in his analysis, "OPEC has 5 million barrels per day of spare capacity, and 1 million barrels per day of increment would have returned to the market with the relaxation of planned production cuts. However, the conflict may escalate in a way that limits some of OPEC's spare capacity from playing a potential role." The core of this concern lies in the strategic importance of the Strait of Hormuz. The strait is not only a crucial route for Iran's oil exports, but also a key channel for oil transportation for core OPEC member countries such as Saudi Arabia. If Iran or its proxies blockade or attack the strait, even with sufficient spare capacity, these oils would have difficulty being smoothly transported to the international market. Goldman Sachs analyst Daan Struyven provided a more detailed scenario analysis for clients. He warned, "Any substantial damage to Iran's oil export infrastructure would significantly reduce supply and could lead to a sharp surge in oil prices." In Struyven's base scenario, assuming a gradual recovery of Iran's supply after a decrease of 1.75 million barrels per day over 6 months, and assuming additional production from core OPEC+ member countries compensates for half of Iran's peak shortfall, Brent crude oil prices would spike to slightly above $90 per barrel. However, Struyven also issued a sterner warning, "In an extreme tail risk scenario, if broader regional oil production or shipping is negatively affected, oil prices could rise more sharply." JPMorgan warned in a report on Thursday that in a "worst-case scenario," if the Strait of Hormuz is blocked, oil prices could soar to $130 per barrel, pushing U.S. CPI back above 5%. After the Israeli attack on Iran, JPMorgan has raised the probability of this "worst-case scenario" from 7% on Thursday to 17%. Another key question is whether Iran or its proxies will target Saudi Arabia's Abqaiq facility - one of the world's most important oil processing centers. An attack on the facility in 2019 briefly disrupted over 5% of global oil supply, providing a real basis for the current market concerns. As geopolitical risks once again become the dominant factor in the oil market, investors must reconsider the vulnerability of energy security and the deep dependence of the global economy on the Middle East's oil supply chain.