The escalating tensions between Iran and Israel have reintroduced a geopolitical risk premium into oil markets, with the potential to drive prices significantly higher. Historical precedents—such as the Yom Kippur War (1973), the Iranian Revolution (1979), and the Gulf Wars (1990, 2003)—demonstrate that Middle East conflicts can trigger prolonged oil supply disruptions, speculative buying, and structural price spikes. Given the current standoff, we see a high probability of a sustained bullish oil environment, driven by three key factors: 

1.Supply Disruption Risks in Critical Chokepoints

2. Iran’s Role as a Major Oil Producer & Potential Sanctions Tightening

3. Market Psychology & Historical Precedent of War-Driven Oil Spikes

1. Supply Disruption Risks: Strait of Hormuz & Regional Escalation  

The Strait of Hormuz handles ~20% of global oil supply, and any direct conflict involving Iran raises the specter of supply blockades or attacks on tankers (as seen in 2019 during U.S.-Iran tensions). 

• Historical Precedent:  The 1973 Arab oil embargo (following the Yom Kippur War) caused oil prices to quadruple in months. 

• Current Risk: If Iran retaliates against Israel by disrupting shipping lanes, even a temporary 1-2 million bpd supply shock
  could push Brent crude above $80-$100/bbl (currently ~$70). 

2. Iran’s Oil Exports & Potential Sanctions Overhang 

Iran currently produces ~3.4 million bpd (~3.3% of global supply) and exports ~1.5 million bpd, primarily to China. A full-scale conflict could lead to: 

• U.S./EU tightening sanctions enforcement, restricting Iranian flows. 
• Preemptive supply hoarding by buyers (similar to 2011-2014 when sanctions removed ~1 million bpd from markets). 

Impact: A loss of 500k-1 million bpd of Iranian supply would erase the current global surplus, accelerating inventory draws. 

3. Market Psychology & Historical War Premiums 

Oil markets are forward-looking and reactive to fear-driven narratives. Even without immediate supply losses, speculative positioning and hedging activity can amplify price moves. 

• 1990 Gulf War Example: Iraq’s invasion of Kuwait removed 4.3 million bpd from markets; oil spiked +125% in 3 months!
• 2019 Saudi Aramco Attacks: A temporary 5.7 million bpd outage sent Brent +20% in a single day. 

Today’s Setup: Options markets are already pricing in higher volatility, with traders increasing long crude bets as geopolitical risks mount. 

Price Targets & Catalysts to Watch

• Base Case (De-escalation): Oil retraces but retains a $5-7 risk premium until tensions ease. 
• Bull Case (Expanded Conflict): Supply disruptions or Iranian retaliation could propel Brent to $80-90 in weeks. 
• Tail Risk (Full Regional War): A worst-case scenario involving Saudi Arabia or a Strait of Hormuz closure could trigger a 1973-style price shock, pushing oil toward $120-150/bbl. 
  

Conclusion: Positioning for Upside

Given the asymmetric risk/reward in oil markets today, Axcapital believes investors should favour high-beta oil equities (OXY, CVX, E&P independents) with leverage to rising prices. 

Bottom Line: The Middle East remains the world’s most critical oil supply hub, and history shows that conflicts here rarely stay contained. With Iran-Israel tensions escalating, the oil market’s risk premium is underpriced—creating a compelling bullish setup. 

How Malaysian Investors Can Play the Oil Rally: Hibiscus Petroleum as the Prime Leveraged Bet

With oil prices poised for a sustained surge due to escalating Middle East tensions, Malaysian investors need a high-beta, locally listed oil play to capitalise on this trend—and as argued by Axcapital in the past months,  Hibiscus Petroleum (5199) stands out as the ideal candidate.

With Middle East tensions fueling a structural bull case for crude, Hibiscus offers Malaysian investors the best pure-play exposure to ride the rally. Its low-cost production, strong cash flows, and undervalued stock make it a must-watch as the oil trade heats up.

Action: Buy Hibiscus now—before the broader market wakes up to the coming oil squeeze.

DISCLAIMER: The views expressed in this article are strictly the author's personal opinions and do not constitute financial advice. Investors should conduct their own due diligence before making any investment decisions.