Kohlberg Kravis Roberts states that oil prices need to reflect a "safety premium" in the near term

Investing.com - Analysts at Carlyle Group, an investment firm, stated that as investors assess the potential disruptions to supply flows caused by the Iran conflict, oil prices will need to reflect a “security premium” in the “foreseeable future.”

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On Tuesday, Brent crude futures surged 4.3% to $81.10 per barrel, and U.S. WTI crude futures rose 4% to $74.05 per barrel. Both contracts reached a one-year high on Monday, with gains of up to 13%, closing with an increase of over 7%.

Tensions escalated after Iranian officials vowed to attack any ships attempting to pass through the strategic Strait of Hormuz, raising concerns about potential disruptions to oil flows from major Gulf producers.

In a report, Carlyle analysts including James Stavridis and Jeff Currie suggested that although recent oil oversupply might help buffer the impact of potential Strait of Hormuz disruptions, broader structural changes in oil flows are expected to keep crude prices “high and volatile.”

They wrote, “We are unlikely to return to an era of instant energy supply,” referring to the long-standing reliance on global energy supplies to meet demand instantly.

Instead, investors must contend with a world “divided,” as described by the analysts, into two groups supported by the U.S. and China, which will increasingly require two separate supply chains.

Carlyle strategists said this “U.S.-China bifurcated world” would make it “extremely difficult” for Iran to close the Strait of Hormuz. Without Chinese cooperation—China being an important ally of Iran and a major importer of oil passing through the strait—Tehran would find it “almost impossible” to shut down the waterway for an extended period.

Conversely, the analysts’ forecast for rising oil prices is based on a potential “security premium,” driven by stockpiling of crude amid uncertain supply conditions and Iran possibly launching “asymmetric” attacks (such as “cyber activities, terrorism, and proxy armed groups”). They noted that Iraq, the second-largest oil producer in OPEC, could become a target of such attacks.

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