Wolfe Research: Iran's ability to disrupt oil supplies "seems limited"

Investing.com - Wolfe Research analysts believe Iran’s ability to disrupt oil supply flows appears limited and may weaken further over time.

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Although Monday’s close was relatively positive, investor sentiment remains subdued, with markets worried that the Middle East conflict is escalating.

Israel attacked targets in Iran and Lebanon, while Tehran launched its own counterattacks, further expanding the Middle East conflict on Tuesday. The Israeli military reported strikes on targets in Tehran, Iran’s capital, as well as the command center and weapons storage facilities of Hezbollah in Beirut.

Meanwhile, the U.S. embassy in Riyadh, Saudi Arabia, was attacked by Iranian drones, and data centers in the UAE and Bahrain were also targeted. Iran has launched retaliatory strikes against several Middle Eastern countries.

Tensions have further 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.

However, Wolfe’s analysts stated in a report that Iran’s ability to disrupt these oil flows “seems limited and may weaken further over time.”

The analysts added, “More importantly, Iran does not appear capable of forcibly blocking the Strait of Hormuz.” This vital shipping route accounts for about 20% of global oil supplies, most of which are shipped to Asia.

They noted, “Currently, militarily blocking the strait would require the use of anti-ship ballistic missiles, cruise missiles, and drones, and the U.S. is actively working to neutralize these threats.”

However, they warned that “more adverse scenarios could still emerge in the future,” especially as missile interceptor inventories begin to dwindle.

Brent crude futures surged 8.6% to $84.36 per barrel, while U.S. WTI crude futures rose 8.3% to $77.12 per barrel.

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