[MARKET ANALYSIS] Crude surges on weekend geopolitics but capped by potential global economic impact

• Crude futures surged at the reopen in reaction to the geopolitical escalation in the Middle East owing to the strikes against Iran and the killing of its Supreme Leader, as well as its retaliation against the US and several neighbours in the Gulf, while it also announced the closure of the Strait of Hormuz. (Newsquawk analysis available on the feed)
• However, prices waned off their opening highs as Brent returned to beneath the USD 80/bbl and WTI briefly retreated to below 70/bbl levels before recovering, with Brent May'26 currently within USD 74.54-80.82/bbl (+6.2% at the time of writing) and WTI Apr'26 within USD 71.88-75.33/bbl (+7.3% at the time of writing).
• ING emphasises that sustained disruption would leave further upside risk for crude, with price action likely to remain headline-driven and volatile. SEB suggests "Broader regional energy infrastructure opens the door to significantly higher oil prices, and could end up in a wide range between USD 100-120/b. Should the US Navy and allies fail to mount a proper defence of oil and gas facilities in the Gulf, that leaves room for even higher oil prices."
• Further in geopolitics, the Middle Eastern conflict expands with Israel discussing a possible ground operation in Lebanon.
• The pullback in prices may be a function of what the conflict means for monetary policy - i.e. higher energy prices could lead to inflationary pressures which could tilt central banks more hawkish.
• Elsewhere, over the weekend, OPEC+ decided it is to resume oil output increases, in which it will add 206k bpd in April. It had been previously reported over the weekend that OPEC+ could consider a larger production hike of as much as 441k bpd following the strike on Iran.

The surge in crude prices reflects immediate reactions to heightened geopolitical tensions in the Middle East, particularly surrounding Iran. However, the subsequent pullback suggests that traders are weighing the potential for sustained inflationary pressure from higher oil prices against central bank responses, indicating that the market may remain volatile and headline-driven in the near term.