Market News

Saudi Arabia’s oil officials are privately warning that crude prices could surge past $180 a barrel if the disruption to global energy supplies caused by the Iran war continues beyond late April, a prospect that is alarming rather than encouraging the world’s largest oil exporter.

The concern, according to a Wall Street Journal report citing several Gulf officials, is not that prices would be too low but that they would be dangerously high. A sustained spike of that magnitude risks pushing consumers into permanently reduced energy habits, triggering a global recession that would ultimately destroy the demand on which the kingdom’s economy depends — and, perhaps just as troublingly, cast Saudi Arabia as a war profiteer in a conflict it did not start.

“Saudi Arabia generally does not like too-rapid increases in oil, because that then creates long-term market instability,” said Umer Karim, an analyst of Saudi foreign policy and geopolitics at the King Faisal Centre for Research and Islamic Studies. “For Saudis, the ideal equation is a relatively modest increase in prices while their market share remains stable.”

How the crisis has escalated

The anxiety in Riyadh has sharpened considerably this week. In retaliation for an Israeli strike on Iran’s South Pars gas field on Wednesday, Tehran struck facilities at Qatar’s Ras Laffan energy hub and attacked Gulf infrastructure, including Saudi facilities at Yanbu — the Red Sea terminus of a pipeline designed to route crude around the Strait of Hormuz. Iran has also continued targeting shipping in the Gulf, a sustained campaign that has all but closed the strait, through which roughly 20 per cent of the world’s oil passes.

The attacks drove benchmark Brent futures as high as $119 a barrel before easing back on Thursday — still well below the all-time high of $146.08 reached in July 2008, but rising fast. Analysts at energy consultancy Wood Mackenzie warned this week that “$200 a barrel is not outside the realms of possibility in 2026.”