On Monday, oil prices were already hovering near those levels, with Brent at above $86 per barrel and West Texas Intermediate (WTI) surpassing $82 per barrel.

Andy Lipow, the president of Lipow Oil Associates, expressed concerns over the increasing geopolitical tensions in the Middle East as the primary driver of the oil market's fear. The rising tensions between Israel and Lebanon's Hezbollah, with support from Iran, have raised the alarm that a cross-border conflict could eventually involve Tehran on a more direct level.

Iran's oil production accounts for approximately 3 million barrels per day, representing roughly 3% of the world's output. Lipow highlighted that the market's main concern is that the tensions could spread and disrupt supplies throughout the Persian Gulf region. Additionally, the analyst expects increasing demand from now until the end of the year to contribute to Brent crude oil prices reaching around $90 per barrel.

Recent weeks have also seen rising demand pushing up crude prices. Last month, US crude prices rose by 6%. Dennis Kissler, the senior vice president at BOK Financial, attributed the recent strength in prices to diminishing crude and product inventories, combined with higher road traffic demand and increased jet travel. He also mentioned that hotter temperatures across most of the United States have positively impacted power generation demand.

Looking ahead, Wall Street forecasts indicate that slowing demand coupled with greater supply will drive prices lower in the coming year. JPMorgan analysts predict that Brent will average $75 per barrel in 2025, a significant decrease from the projected $83 per barrel in 2024. Goldman Sachs, on the other hand, maintains its target for next year unchanged at an average of $82 per barrel.

The outcome of the geopolitical tensions in the Middle East and the subsequent impact on oil prices remains uncertain. However, industry experts will continue to monitor the situation closely as the market braces itself for potential disruptions and shifts in supply and demand dynamics.