Investing.com – Iran’s ongoing conflict with Israel could have a “very detrimental” impact on oil supplies out of the Middle East, according to analysts at BofA.
Writing in a note to clients, the brokerage suggested that, with Israel’s recent bombardments placing pressure on Tehran, “it is not inconceivable that Iran could transition into a different form of government under the current circumstances.”
They added, under such a scenario, “an internal power struggle” in Iran could dent energy supplies from the crucial Middle East, a major source of global production.
Although they noted that the OPEC+ producer group has “plenty of spare capacity” and could offset some of these lost barrels, “it is possible that caution or simply disagreements” within the cartel slow down its plans to introduce more supply back into the market this year. OPEC+ has previously agreed to return a rate of 138,000 barrels per day per month, after it already increased quotas by 411,000 barrels per day for three months straight.
Should OPEC+ opt to ratchet down its supply releases, it would likely support Brent crude oil prices in the near term and may even lift 2026 prices above $70 per barrel, the BofA analysts predicted.
On Tuesday, Israel’s military said that it had carried out “several extensive strikes” on military targets in western Iran, including on surface-to-surface missile storage sites and launch infrastructure.
A senior Iranian general “in the heart of Tehran” was killed overnight, Israel’s Air Force also claimed. Iran has not yet confirmed the statement.
Meanwhile, the Trump administration is discussing with Iran the possibility of holding talks this week on a potential nuclear deal and an end to the conflict with Israel, Axios has reported. U.S. envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi could meet as part of the proposed talks, Axios reported, citing four sources briefed on the matter.
While the meeting is yet to be finalized, it represents a renewed effort by Trump to lower hostilities between the two Middle Eastern powers and bring the focus back towards a nuclear deal.
Oil prices advanced against this backdrop.
Source: Investing.com