As tensions escalate in the Middle East, Brent crude — which closed Friday just under $73 a barrel — is widely expected to spike when Asian markets open. But Alastair Newton, CEO of Alavan Business Advisory, is urging investors not to panic.
“We are already looking at an Iran-related risk premium on Brent crude of somewhere between $10 and $15 a barrel,” Newton told ET Now. With global markets carrying a surplus of roughly 3.5 million barrels per day, he argues the underlying price should sit closer to $60 — meaning a substantial cushion of geopolitical anxiety is already baked in.
Predictions of Brent hitting $100 a barrel are “hyperbole,” in Newton’s view. While a spike is coming, he expects it to be “more modest than some investors are expecting” and likely short-lived.
Hormuz: Troubled, not closed
Despite Iranian claims, Newton stressed that the Strait of Hormuz remains physically open. The vessel reportedly sinking is off the coast of Oman, and a substantial US naval presence — along with Israeli and American air superiority — makes a sustained physical blockade unlikely.
The more immediate concern, he says, is insurance. Premiums surged sharply over the weekend, forcing tanker owners to weigh whether to pay elevated war-risk costs or hold position and wait out the uncertainty.
OPEC’s role is limited — for now
With an OPEC+ meeting scheduled, some are watching whether the group will accelerate its planned production increase. Newton is sceptical it will matter much in the near term. An additional 400,000–500,000 barrels per day cannot meaningfully offset the 20 million-plus barrels that transit Hormuz daily.Longer term, however, the picture shifts. If Saudi Arabia proceeds with unwinding its voluntary cuts, Newton sees it as a signal that Riyadh is determined to reclaim market share lost to US shale — a strategy that points to sustained downward pressure on oil prices once the immediate crisis passes. That outcome, he notes, would be warmly welcomed by Donald Trump.
Options for India
For major importers like India — which sources an estimated 45–50% of its oil through the strait — Newton believes policymakers will take a measured, medium-term view rather than making reactive shifts toward Russian crude. India’s existing trajectory on energy diversification, he suggests, will remain broadly intact.
Markets: Volatility, then calm
Expect turbulence in equity markets and the usual flight to safe havens, Newton cautioned — though he noted even the US dollar’s safe-haven status has diminished over the past 18 months. Still, he believes investors, who have shown consistent resilience to geopolitical shocks since October 2024, will “see through the noise” relatively quickly.
“I do not think we are going to see the Strait of Hormuz close for a protracted period of time,” he concluded. “Things are going to settle down fairly quickly.”