Oil prices to remain high as Israel-Iran geopolitical risks increase, Pimco reports

Devika Krishna Kumar, Bloomberg April 07, 2024

(Bloomberg) – Oil prices are likely to remain at current highs as geopolitical risk factors increase, but the next significant price jump would likely come if Israel attacks Iran’s energy facilities, said Greg Sharenow, head of the commodity portfolio management group at Pacific Investment Management Co LLC.

Brent crude rallied more than 2% to climb above $90 a barrel on Thursday after Israeli Prime Minister Benjamin Netanyahu vowed to retaliate to any attack from Iran, despite the United States urging Israel to protect civilians.

“The way in which I think it really impacts the broader oil balances is whether Israel responds by looking to attack Iranian energy infrastructure,” Sharenow said in an interview, adding that it would be one way to weaken Iran by lessening its oil revenues.

Sharenow cautioned that approach would elicit a lot of opposition from other world leaders, but the risk is higher especially since Ukraine has been targeting Russia’s refineries in its war with Moscow. For now, the United States is unlikely to release more barrels from the Strategic Petroleum Reserve without a material loss to physical supplies, particularly since it may disincentivize Saudi Arabia from easing its current supply curbs, he added.

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