Brent Crude: Middle East Tensions Keep Risk Premium on Oil Prices - Commerzbank

Brent crude is currently trading at $110.09 per barrel, having earlier risen to a six-month high. Commerzbank analyst Carsten Fritsch said multiple geopolitical factors are providing considerable risk premium support for oil prices.

**Triple geopolitical risks converge, Strait of Hormuz in focus**

Fritsch noted that the current risk premium on oil prices stems from three directions: geopolitical tensions surrounding Iran, Houthi attacks on Saudi Arabian energy facilities, and transit risks in the Strait of Hormuz. According to reports, Saudi Arabia's Energy Ministry previously reported that attacks on southern energy facilities triggered a fire, while Iran's Islamic Revolutionary Guard Corps has also claimed to have launched attacks on multiple vessels in the Persian Gulf, with regional tensions continuing to escalate. Meanwhile, market sources indicate that foreign ministers from Middle Eastern countries are seeking to reach a provisional agreement with Iran regarding vessel transit through the Strait of Hormuz, with related talks reportedly held in Oman.

**Supply-side uncertainty persists, diplomatic efforts have limited effect**

On the supply front, some OPEC+ member states have decided to maintain their existing production targets unchanged. Although diplomatic mediation briefly eased market concerns over supply disruptions, causing oil prices to pull back temporarily, uncertainty over Middle Eastern crude supply has not been fundamentally eliminated, and prices remain broadly in a high range. The Houthis' advance in Yemen has also raised additional concerns in the market over the Bab el-Mandeb Strait, a critical shipping lane connecting the Red Sea and the Gulf of Aden.

**Diverging views on whether the risk premium can persist**

Commerzbank's analysis shows that as long as the aforementioned geopolitical risk factors are not substantially alleviated, the risk premium on Brent crude will be difficult to fade quickly. However, the market is also monitoring progress in diplomatic negotiations and policy moves by major producing countries; if signs of de-escalation emerge, the possibility of downward pressure on oil prices should not be overlooked.