According to World Oil, oil prices could surge $5 to $12 per barrel when futures markets open Monday following unprecedented US-Israel military strikes on Iran over the weekend. Some analysts are predicting Brent could hit $90 per barrel at Monday’s open, with worst-case scenarios pushing prices above $100 if the Strait of Hormuz faces disruption.
Futures prices had already climbed more than 2% on Friday in anticipation of hostilities, with Brent reaching $72.86/bbl (+2.45%) and WTI hitting $67.02/bbl (+2.78%). US gasoline prices are expected to rise above $3.00/gal from the current $2.98 level.
OPEC+ Response
OPEC+ moved quickly to soften the blow, announcing Sunday that eight member nations would raise daily output by 206,000 barrels per day. However, energy analysts don’t expect the increase to significantly dampen prices.
Reuters reported that Saudi Arabia has been quietly increasing production by around 500,000 bpd in recent weeks, apparently anticipating the strikes. The Kingdom and UAE have additional spare capacity available if supply shortages materialize.
Strait of Hormuz Risk
The narrow waterway off Iran’s southern coast remains the critical concern. According to the US Energy Information Administration, roughly 20 million barrels per day flow through the strait, representing about one-fifth of daily global production. Iran has previously threatened to close the strait during disputes with Western nations.
During the 12-day war with Israel and the US last summer, Goldman Sachs estimated that oil prices could exceed $100/bbl if the strait was closed or partially closed for an extended period. Bob McNally of Rapidan Energy Group called the current situation “a very serious development” for global oil and gas markets.
Andy Lipow of Lipow Oil Associates estimates a 33% probability of worst-case scenarios involving attacks on Saudi infrastructure or strait closure.
What It Means for Subcontractors
Field service contractors should prepare for near-term cost pressures and potential opportunities:
-
Fuel costs rising: US gasoline likely to exceed $3.00/gal this week, directly impacting fleet and equipment operating costs. Review fuel surcharge clauses in existing contracts.
-
Fixed-price contract risk: Operators may push back on price adjustments. Now is the time to discuss fuel cost pass-throughs before prices spike further.
-
Drilling activity could increase: Higher oil prices historically accelerate upstream investment. Permian and Bakken operators may greenlight projects that were marginal at $65-70 oil.
-
North American shift: If Middle East instability continues, operators may redirect investment toward domestic production, increasing field service demand in Texas, New Mexico, and the Rockies.
-
Cash flow timing: Expect some operators to delay payments as they assess market conditions. Tighten receivables monitoring over the next 30-60 days.
The duration of price increases will depend on how long military operations continue and whether Iranian-controlled shipping routes face disruption.
