Oil market fundamentals remain unchanged

Key highlights:

• Oil market fundamentals remain largely unchanged despite Iran-Israel tensions, with no material supply disruptions observed.
• The recent increase in oil prices is driven by geopolitical risk; the greater (lower) the uncertainty, the higher (lower) the premium added by markets.
• Prices are likely to retreat once tensions ease, as seen during the Ukraine war when fears subsided without major supply losses.
• Higher prices benefit flexible producers like U.S. shale and improve GCC government revenues.
• Sustained conflict risks eroding investor confidence in the region, with broader economic consequences outweighing any short-term price gains.