Oil prices could soar if Israel targets Iran’s energy infrastructure

Oil markets are being too complacent given the risk of major supply disruptions in the Middle East, analysts told CNBC on Thursday, with one warning that crude futures could rally to more than $200 a barrel.

It comes amid speculation that Israel could be planning to launch a retaliatory attack on Iran targeting its oil infrastructure — a prospect which would likely deliver a rude awakening to bearish energy market participants.

Iran, which is a member of the Organization of the Petroleum Exporting Countries (OPEC), is a major player in the global oil market. So much so, it is estimated that as much as 4% of the world’s supply could be at risk if Iran’s oil infrastructure becomes a target for Israel.

Speaking to CNBC’s “Street Signs Europe” on Thursday, Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB, said escalating tensions in the Middle East could have dramatic consequences for the market.

“If … you really took out the oil installations in Iran, force down the exports by 2 million barrels, then the next question in the market will be what will happen now in the Strait of Hormuz? That, of course, would add a significant risk premium to oil,” Schieldrop said.

Asked the extent to which oil prices could spike in such a scenario, Schieldrop replied, “If you take out installations in Iran, easily you go to $200-plus.”

Situated between Iran and Oman, the Strait of Hormuz is a narrow but strategically important waterway that links crude producers in the Middle East with key markets across the world.

Oil prices have climbed more than 4% since the start of the week as traders have closely monitored elevated geopolitical risks in the Middle East.

International benchmark Brent crude futures with December expiry traded more than 2.1% higher at $75.50 per barrel on Thursday, while U.S. West Texas Intermediate crude futures stood at $71.75, over 2.3% higher for the session.

Israeli Prime Minister Benjamin Netanyahu on Tuesday pledged to respond with force to Iran’s ballistic missile attack, insisting Tehran would “pay” for what he described as a “big mistake.” His comments came shortly after Iran fired more than 180 ballistic missiles at Israel.

Speaking during a visit to Qatar on Thursday, Iranian President Masoud Pezeshkian said his country was “not in pursuit of war with Israel.” He warned, however, of a forceful response from Tehran to any further Israeli actions.

“It all depends on how the conflict escalates further and I think it goes without saying that Israel is going to retaliate after the latest Iranian attack — and it’s going to happen within, like, five days probably, before…