HSBC analysts in a note on oil, restating their Brent crude forecasts:
- lack of supply disruptions and significant OPEC+ spare capacity is helping contain oil prices
- "In our view, the muted price response shows that there was a fair degree of geopolitical risk already priced in"
- market believes an escalation into a broader regional conflict is unlikely
- but add the caveat: "Regional escalation cannot be ruled out, and as such we expect the current geopolitical risk premium from the Middle East conflict – around the mid-single digits – to persist"
- if the crisis does escalate, it may not necessarily lead to supply disruptions
- there is a high likelihood that OPEC+ dials back its supply cuts in Q3 this year given high prices
