UAE fuel prices likely to rise as oil rates may cross $100 due to Israel-Iran conflict

Khaleej Times

8 hours ago

Oil prices could surge to over $100 a barrel due to the Israel-Iran war, even though there is plentiful spare capacity and ample storage, analysts said.
Crude oil rose as much as 14 per cent after Israel launched a major and unprecedented attack on Iran on Friday morning, targeting nuclear and military facilities.
On the weekend, the WTI and Brent prices closed at $72.98 and $74.23 per barrel, up 7.26 and 7.02 per cent, respectively. If oil prices continue to rise or remain consistently higher, this means UAE motorists will have to shell out more next month.
In June, the UAE maintained the oil prices unchanged, with Super 98, Special 95, and E-Plus pricing at Dh2.58, Dh2.47, and Dh2.39 per litre, respectively.
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In October 2024, Israel had launched a major strike on Iranian nuclear facilities. At the time, Iran responded with drone attacks that were mostly intercepted and perceived more as a warning than a retaliation. "Tensions eventually eased, and markets quickly settled. A similar de-escalation is possible now, but not guaranteed. Judging by the price action, the market's response to last night's attack has been very strong," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
'One scenario is de-escalation, which could bring oil back below $70 per barrel, shifting the market's attention back to supply-demand dynamics, trade disruptions, and renewed pressure on Russian oil. The other scenario is broader escalation, potentially pushing oil prices toward $90-$100 per barrel – hopefully only temporarily,' said Ozkardeskaya.
As Iran and Israel are at full-scale war, Naeem Aslam, an analyst at Zaye Capital, said, 'Markets are staring down a barrel of volatility.'
'Oil's surged up to 14 per cent on Israel's strikes; prices could breach $120 if energy infrastructure gets hit. Markets are on edge – any disruption in this oil-rich region could send crude soaring further,' he added.
Price rise is temporary
Norbert Ruecker, head of economics and next-generation research at Julius Baer, said oil is the fever gauge of such conflicts, and prices spiked accordingly.
'The situation remains in flux, and the coming days and weeks will show how far the escalation goes. Our best guess is that this latest conflict eruption follows the usual pattern, with prices rising temporarily before returning to previous levels. The oil market is very resilient today, and supplies are unlikely at risk. Storage is ample, spare capacity plentiful, and exports grow outside of the Middle East. The situation remains unpredictable for the time being, and we thus lift our near-term target to $72.5,' said Julius Baer's analyst.
He added oil supply concerns of course are boiling up and the risk of a closure of the Strait of Hormuz, a key choke point of oil trade, moves into focus, said analysts.
'Such a disruption, however, remains a low probability consequence from our perspective. The oil market overall is very supply-resilient. Storage is ample in the Western world and especially in China, which built extensive oil inventories over the past decade. Oil producers have plentiful spare production capacity, exceeding 5 per cent of global output, which they just began to bring back to the market.'
Ole Hansen, head of commodity strategy at Saxo Bank, said even a brief disruption of the Strait of Hormuz, the world's most critical oil transit chokepoint that sees more than 20 million barrels of crude pass through daily, could trigger a sharp price spike, with some analysts warning of a potential move toward $100 per barrel in a worst-case scenario.