Major upgrade! Energy facilities have been involved, Wall Street

# Ye Zhen

Source: Wall Street CN

Core energy infrastructure in the Middle East has been drawn into the conflict, and the likelihood of the war ending in April, the Strait reopening, and oil prices retreating is diminishing. The escalating situation is reshaping Wall Street’s assessment of the conflict’s duration. Analysts warn that if the conflict does not conclude before April, oil prices could surge to $150 per barrel; some even caution that the conflict could evolve into an energy shock similar to that of the 2022 Russia-Ukraine war, and President Trump’s strategy of seeking an early exit risks failure.

The Middle East conflict has escalated abruptly, with core energy infrastructure directly targeted. As Israel and Iran strike each other’s critical oil and gas facilities, Wall Street is rapidly revising its timeline for the conflict, fearing it could turn into a months-long war that replicates the 2022 global energy supply shock.

According to CCTV News, Iran has announced it will fully target U.S.-linked oil facilities and has designated energy infrastructure in Saudi Arabia, the United Arab Emirates, and Qatar as legitimate targets. Near the close of U.S. stock trading on Wednesday, Qatar stated that Iranian missiles had struck a liquefied natural gas (LNG) hub, causing “severe damage” to the site of the world’s largest LNG export facility.

Previously, Israel, in coordination with the U.S., launched a raid on facilities related to the South Pars Gas Field, which processes approximately 40% of Iran’s natural gas, prompting Iran to launch direct reciprocal retaliation. This marks the first direct strike on Iran’s upstream oil and gas assets in the current conflict.

The tangible threat of energy disruptions has triggered violent volatility in the crude oil market. On Wednesday, WTI crude climbed from an intraday low of $91 to near $99. Brent crude surged 7%, approaching $110 per barrel.

The escalating situation is altering Wall Street’s judgment of the conflict’s duration. Analysts believe the probability of the conflict ending in April, the Strait reopening, and oil prices falling is declining.

As reported by Barron’s, analysts warn that if the conflict does not end before April, oil prices could surge to $150 per barrel. Some even caution that the conflict could evolve into an energy shock similar to that of the 2022 Russia-Ukraine war.

If shipping disruptions in the Strait of Hormuz persist, the global economy will not only face soaring crude oil and natural gas prices but also see supply chain fractures rapidly spread to industrial metals, fertilizers, and even agricultural commodity markets.

## Wall Street Revises Conflict Timeline: The “2022 Scenario” Repeats

As the scope of hostilities expands, Wall Street is drastically revising its expectations for when the conflict will end.

According to Barron’s, Christopher Granville, Managing Director of Global Political Research at TS Lombard, noted in a client report that he is extending his base-case forecast for the duration of the shock from 4–5 weeks to 5 months, mirroring the energy shock triggered by the 2022 Russia-Ukraine conflict. He stated that President Trump’s strategy of seeking an early exit risks failure.

Bhanu Baweja, a strategist at UBS, similarly warned that markets, accustomed to buffers from U.S. policy reversals, are unprepared for a prolonged conflict. He projects that if the conflict does not end in April, oil prices could hit $150 per barrel. Although the S&P 500 has fallen only about 4% since the conflict began, Baweja pointed out that the current average price-to-earnings ratio of U.S. stocks, at 22 times, makes them more vulnerable to energy shocks.

Christopher Smart, Managing Partner at Arbroath Group, believes a more likely outcome is a chaotic middle ground where Gulf navigation security does not return to pre-war levels. This would lead to sustained energy price increases and raise the odds of a recession.

## Strait of Hormuz Disruptions Ripple Across Commodities

As previously noted by追风交易台, Bank of America (BofA) stated in a research report that the Strait of Hormuz is the “master switch” for the global energy market. Francisco Blanch, BofA’s Head of Commodities and Derivatives Strategy, argued that if Strait traffic remains blocked, crude oil and refined products will be forced to reprice with a higher risk premium. In the base case, Brent crude is projected to average around $77.50 per barrel in 2026; in an extreme scenario, prices could peak above $240 per barrel.

The shock is not confined to oil and gas. In metals, the Middle East accounts for about 9% of global aluminum supply, and smelters such as Qatar’s Qatalum have been shut down or declared force majeure. BofA forecasts that aluminum prices could exceed $5,000 per ton in an extreme scenario. Meanwhile, disruptions to Middle Eastern sulfur exports could materially impact production in Africa’s copper belt within two to three months.

In agriculture and chemicals, the crisis is also spreading. Urea, a key fertilizer feedstock, is highly dependent on natural gas. Gas supply cuts in Qatar and elsewhere have led to production reductions in India and across Europe. BofA warns that urea shortages will drive up corn and wheat prices, projecting broad increases in major agricultural commodity prices for all of 2026, with corn prices potentially nearing $7 per bushel in an extreme scenario.

## Investor Strategies: Focus on Far-Month Contracts and Safe-Haven Assets

Despite the severe challenges, some mitigation measures are underway. Reports indicate Saudi Arabia is diverting crude oil via pipelines to the western port of Yanbu, which has averaged 4.19 million barrels per day in shipments over the past five days, successfully restoring more than half of pre-war normal levels.

For asset allocation, BofA notes that markets have not fully priced in far-month contracts and volatility. The 1-year implied volatility for crude oil and aluminum remains near historical averages, indicating markets still expect the conflict to be short-lived. BofA recommends investors focus on forward Brent options and deferred agricultural commodity options.

On the macro front, BofA maintains its 12-month gold price target at $6,000 per ounce. The report states that if the war extends into the third quarter or the full year, a scenario of high inflation and economic stagnation will force the Federal Reserve to cut rates before inflation peaks, providing a strong catalyst for gold to break through $6,000–$6,500 per ounce. Conversely, if oil prices exceed $160 per barrel and trigger a global demand collapse, metals and grain assets will face significant downside risks.

## Risk Warning and Disclaimer

The market is risky, and investments require caution. This article does not constitute personal investment advice and does not consider the specific investment objectives, financial situations, or needs of individual users. Users should assess whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment decisions made based on this article are at the user’s own risk.