Brent crude could hit $75 on US-Iran tensions, says Peter McGuire

Geopolitics, not demand, is currently dictating oil prices, with Brent crude moving back above $70 per barrel as US-Iran tensions intensify. Trading.com CEO Peter McGuire said Brent could move toward $75 a barrel if geopolitical frictions worsen.

“The impact is going to be felt very much in China and, of course, across the fabric of Asia,” he said, adding that any disruption would immediately inject a 'war premium' into prices, and it's difficult to predict the duration.

The biggest risk to markets, McGuire said, is the Strait of Hormuz, a narrow channel that carries more than 30% of global crude flows.

Crude's supply backdrop does not support elevated prices, with a glut in the market that would likely push oil lower if the geopolitical risk premium disappears. McGuire pointed to the unresolved Russia-Ukraine situation as another factor keeping energy markets on edge.

While an outright conflict is not yet certain, McGuire thinks it's still early days. Some analysts suggest the probability of military action could be 50% or greater by April. The key variable would be the US response to any Iranian threat involving the Strait of Hormuz, because even rhetoric around the waterway can move global prices.

A flare-up would extend beyond oil into the broader commodity complex. McGuire expects a flight to safety, with gold and silver likely to rise and the US dollar strengthening back toward the 99 level on the index. “Across the commodity complex, it's going to be one word, and I think that's going to be volatility,” he said.

Also Read: Oil prices hold biggest gain since October on concerns regarding Iran conflict

For the entire interview, watch the accompanying video

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