President Donald Trump-led US administration is preparing for weeks of ground operations in Iran, the Washington Post reported yesterday. US Central Command said on X that it has deployed 3,500 Marines and sailors to the Middle East aboard the USS Tripoli, marking the largest American military buildup in the region in two decades.
Iran’s parliament speaker, meanwhile, warned that the country’s forces were “waiting for American soldiers” and would “rain fire” on any US troops attempting to enter Iranian territory. In his message, reported by Iranian state media, Ghalibaf also said: “The enemy signals negotiation in public, while in secret it plots a ground attack”.
Additionally, Yemeni Houthis launched their first attacks on Israel over the weekend, widening the ongoing war and adding to inflation woes.
These developments led to a rise in worries for prolonged supply disruption for oil, spurring the rally in oil prices. Brent crude futures jumped over 3.4% to trade at $116 per barrel, while West Texas Intermediate (WTI) futures gained more than 3% to trade at $103 per barrel, as seen at around 8 am IST.
The war, which began earlier this month with US-Israeli strikes killing Iran’s former supreme leader Ayatollah Ali Khammenei and resulting in massive retaliation from Tehran, has spread across the Middle East. Fear now rises for a ground offensive and the entry of Yemen’s Iran-aligned Houthis.Pakistan said it was preparing to host “meaningful talks” to end the prolonged war in the coming days, although Iran said it is ready to respond if the United States launches a ground operation.
What lies ahead?
Macquarie has warned that crude prices could surge to an unprecedented $200 a barrel if the Iran conflict drags into mid-year and keeps the vital Strait of Hormuz shut. “If the strait were to stay closed for an extended period, prices would need to move high enough to destroy a historically large amount of global oil demand,” the Macquarie analysts said in the March 27 report, as reported by Bloomberg. “The timing of the re-opening of the straits, and physical damage to energy infrastructure, is the main determinant of the longer-term impact on commodities,” it added.
Ambit Institutional Equities, in its report, said that even if geopolitical tensions cool off, oil prices will remain elevated, with $80 being the new normal for Brent due to infrastructure damage, geopolitical risk premiums, and inventory restocking.
“While physical damage assessments to upstream and refining infrastructure remain preliminary, initial indications point to meaningful disruptions. Layering on this, geopolitical risk premiums are being embedded in near-term crude prices. At the same time, demand is being amplified by inventory restocking as importers rush to rebuild depleted SPR and OECD stocks. Taken together, these three factors underpin our view of sustained near-term crude price elevation,” it wrote.
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