Iranian war reignites, will Brent oil prices hit $80 again?

On February 28th, the United States and Israel launched a large-scale joint military strike against Iran, causing a sudden escalation of risks in the Middle East. The market's initial reaction is usually to chase after risk premiums, but what truly determines the direction of oil prices is not emotions, but whether the supply chain is substantively damaged. According to research by Kim Fustier, senior global oil and gas analyst at HSBC, the core judgment he gave in a recent study is that the risks related to Iran for the oil market are "asymmetric", with significantly more upside potential than downside potential. The safety of transportation in the Strait of Hormuz is the biggest variable, and if there is a brief interruption, Brent oil prices could quickly spike towards $80 per barrel. However, outside of all scenarios, HSBC maintains its long-term assumption of $65 per barrel for Brent in 2026. The reason is simple: there is still an oversupply of about 2.3 million barrels per day globally, OPEC+ has considerable spare capacity, and geopolitical risks can raise prices, but they cannot change the medium-term supply-demand framework. The question is, which path will the conflict take? Will oil prices see a "pulse-like surge" or evolve into a structural reevaluation? The true core of the risk is not in Iran's oil fields, but in the Strait of Hormuz. Iran's current liquid production is around 4.6 million barrels per day, with about 3.3 million barrels per day being crude oil. Before, exports were around 1.6-1.8 million barrels per day, with almost all flowing to East Asia. If the military action is limited to airstrikes on nuclear facilities or military targets and does not affect energy infrastructure, Iran's crude oil supply itself might not immediately decline significantly. The real leverage is on the transportation end. Approximately 19% of the global supply, around 19-20 million barrels per day, passes through the Strait of Hormuz. About 15 million barrels are crude oil, with the rest being refined products and LPG. Even if a blockade cannot be sustained for long, a brief interruption is enough to cause a sharp price increase. Alternative paths are limited. The total capacity of pipelines going east-west in Saudi Arabia is around 7 million barrels per day, but the spare capacity is only 2-4 million barrels. The pipeline from the UAE to Fujairah has a spare capacity of about 400-500 thousand barrels. The total combined replacement capacity is far from enough to cover the transport volume through the strait. This means that if Iran chooses to retaliate in the direction of the strait, the oil price's reaction will be far beyond just a reduction in Iran's production. OPEC's "spare capacity" is not available in a blockade scenario. The Gulf OPEC countries currently have a combined spare capacity of about 4.6 million barrels per day: Saudi Arabia 2.1 million barrels, UAE 1.2 million barrels, Iraq 480 thousand barrels, Kuwait 360 thousand barrels, and Iran about 500 thousand barrels. But these capacities are highly dependent on the exports through the Strait of Hormuz. If the strait is blocked, the theoretical "buffer" in the market would physically fail. The global oil market has relied on the spare capacity in the Middle East in recent years, and once transportation is restricted, the buffering mechanism would suddenly stop working. This is also the logical basis for HSBC's statement of "asymmetric risks" the risk of supply disruption is far greater than the space for prices to fall back after an agreement is reached. Different escalation paths correspond to different oil price ranges. In various scenarios listed by HSBC, the price elasticity shows a stair-step upward movement: Limited strike, no retaliation: oil prices may jump 5-10 dollars in the short term, then fall back, similar to the event in June 2025. Broader military escalation: Iran's production could drop to a range of 2.8-2.6 million barrels per day, causing a price increase of 10-15 dollars. Internal turmoil plus conflict: production dropping to 2.2 million barrels per day, supply shocks expanding to the entire Gulf, price increases may exceed 15 dollars. Historical cases are not uncommon. The 1979 Iranian Revolution, two Gulf Wars, and the Libyan civil war have led to production losses lasting for several years. What truly changes the oil price cycle is not airstrikes, but the instability of regimes and social order. There are currently no signs showing systematic destruction of Iran's energy infrastructure. If the conflict remains at the level of military targets, the market is more likely to follow the path of "spike in prices fall back". The risks of refined products are underestimated. The market's focus is on crude oil, but around 10% of global diesel and 20% of aviation fuel rely on transportation through the strait. Europe and the US are currently in the post-refinery maintenance phase, with tight supplies of refined products. If transportation interruptions persist, the aviation fuel market might see regional shortages first. Price signals might be reflected first in crack spreads, rather than in Brent prices themselves. The medium-term framework remains "geopolitical premium within surplus". HSBC's latest estimate shows a global surplus of about 2.3 million barrels per day in liquid supply and demand in 2026 (previously 2.6 million barrels). Even with considering geopolitical risks, this structure has not reversed. OPEC+ will resume increasing production after the March 1st meeting. HSBC expects quotas to increase by 137,000 barrels per day in April, with monthly increments rising to about 280,000 barrels per day from May to July. The group's primary goal now is to regain market share, rather than further tightening supply. As long as Brent remains above $70 per barrel, the possibility of OPEC+ actively reducing production in 2026 is very low. This means that as long as the Strait of Hormuz remains open, the oil price center is unlikely to deviate too far from the long-term assumption of $65 per barrel. This article is from Wall Street News; GMTEight Editor: Wang Qiujia.