Caijing Macro: The surge in oil prices reflects the risk premium, rather than changes in market fundamentals.

Senior macroeconomists at Capital Economics said that the overnight surge in oil prices reflects a significant increase in geopolitical risk premium, rather than a change in market fundamentals. They stated, "It appears that Iran's oil production or export facilities have not been directly impacted." However, "continued uncertainty and/or escalation of hostile actions could raise the risk premium of oil prices, potentially leading to further increases." Traders are particularly concerned that Iran may retaliate through the Strait of Hormuz, through which about 25% of global seaborne oil supply and 20% of global liquefied natural gas transportation pass. However, analysts pointed out that the oil production facilities of Gulf economies are unlikely to be directly interfered with.