War risk keeps upside in focus – Commerzbank

Commerzbank’s Chief Economist Dr. Jörg Krämer notes that Brent crude Oil has reacted only moderately so far to the Middle East war and effective closure of the Strait of Hormuz, briefly rising above $80 before easing. He argues that if the conflict is short, the Eurozone and German economies should be little affected, but a prolonged war could push Brent towards $100 and keep it elevated.

Oil reacts moderately but upside risks grow

“The price of Brent crude oil has so far reacted relatively moderately to the war in the Middle East and the de facto closure of the Strait of Hormuz.”

“The price of Brent crude oil rose to a peak of just over $80 in Asian trading and then fell slightly.”

“If the war lasted only a few weeks, the German and the eurozone economy would not be significantly affected. If, on the other hand, the war were to drag on for several months, inflation in the eurozone would probably rise by at least 1 percentage point and economic growth would be a few tenths of a percentage point lower which would be painful. We assume the war to be shorter.”

“In the event of a prolonged war, the Strait of Hormuz is likely to remain impassable for a longer period of time.”

“The price of Brent crude oil could then rise towards $100 per barrel and remain at this level for some time.”

“Compared to mid-February (before speculation about war began to surge), this would represent an increase of around 40%.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)