Oil markets should start reflecting a longer-term "security premium" because of risks tied to the Iran conflict and the potential for interruptions to crude flows, analysts at Carlyle wrote in a recent note. The warning comes as markets reacted sharply to threats against shipping through the Strait of Hormuz.
On Tuesday, Brent futures jumped 4.3% to $81.10 a barrel while U.S. West Texas Intermediate futures rose 4% to $74.05 a barrel. Both contracts ended the session more than 7% higher after posting intraday gains of as much as 13% to reach one-year highs on Monday.
Carlyle strategists including James Stavridis and Jeff Currie pointed to intensified tensions after Iranian officials vowed to attack any ship attempting to transit the Strait of Hormuz, a vital artery for crude flows from Gulf producers. The note said these threats increase the prospect of disruptions to shipments that underpin global supply.
At the same time, the analysts acknowledged that a recent oil supply glut could help cushion the immediate effects of any temporary stoppage through the waterway. Despite that buffer, they argued crude prices are likely to remain "high and volatile" because of broader structural changes in how oil moves around the world.
"We are unlikely going back to just-in-time energy," the note states, signaling a shift away from relying on global markets to instantly meet demand. Carlyle's team described a growing "fragmentation" of the world into two blocs - one backed by the U.S. and the other by China - which will "increasingly require" separate supply chains for each bloc.
The strategists argued that in such a "bilateral U.S.-China world" it would be particularly difficult for Iran to close the Strait of Hormuz for any prolonged period. In their view, without cooperation from China - characterized in the note as a key ally of Iran and a major importer of oil flowing through the Strait - it would be "nearly impossible" for Tehran to sustain a full closure of the waterway.
Carlyle said, however, that its expectation of sustained elevated prices is grounded in the idea of a "security premium". This repricing would stem from crude hoarding in an uncertain supply environment as well as the possibility of Iranian "asymmetric" attacks, which the analysts listed as including "cyber activity, terrorism, and proxy forces." They noted that such strikes could target other producers, singling out Iraq - the second-largest producer in the OPEC group - as a potential target.
In sum, Carlyle's note frames recent price strength as a response to near-term geopolitical threats layered over structural shifts in global energy security and supply chains. Even with temporary surplus capacity, the firm sees a market that must now price in the risk of supply fragmentation and unconventional forms of attack that could add a persistent premium to crude.