A worker adjusts a valve of an oil pipe in Zubair oilfield in Basra, Iraq.

Essam Al-Sudani | Reuters

A dramatic escalation of geopolitical tensions will most likely result in an unplanned oil supply shortage in the Middle East, energy analysts told CNBC on Tuesday, elevating the likelihood of another spike in oil prices.

International benchmark Brent crude rose to its highest level since September in the previous session, briefly climbing above $70 a barrel, as U.S. West Texas Intermediate (WTI) surged to its highest value since April.

The gains follow intensifying fears about the prospect of retaliatory action from Tehran, after the U.S. killed a top Iranian general late last week.

“The consequence one can draw from the latest chapter of the U.S.-Iran relationship is that the geopolitical risk premium is more likely to turn into unplanned supply shortage than disappear,” Tamas Varga, senior analyst at PVM Oil Associates, said in a research note published Tuesday.

“The only questions are when and in what form,” Varga said.

Oil price jump

The death of Iranian military commander Qasem Soleimani has ratcheted up already-high tensions between Washington and Tehran, with many investors increasingly anxious that a widening conflict could disrupt global oil supplies.

Oil prices pared some of their recent gains on Tuesday afternoon, with Brent crude trading down almost 1% at $68.23 a barrel.

U.S. WTI stood at $62.73 at 12:45 p.m. London time, around 0.9% lower.

Analysts at Eurasia Group said an almost $10 price jump in Brent futures since the start of December highlighted a “significant increase in the geopolitical oil price premium” after the death of Soleimani last week.

As a result, the political risk consultancy said its base case oil price for 2020 is a range of $65 to $75 a barrel, “with risks to the upside.”

“With Tehran promising retaliation for the U.S. strike and Washington also threatening more attacks, there is an elevated likelihood of substantial oil supply disruptions in the Middle East and resulting price spikes,” analysts at Eurasia Group said in a research note published Monday.

“While an intensification to all-out war is unlikely, further lethal action between U.S. and Iranian forces and attacks against energy infrastructure are probable and will keep markets on edge.”

“It is not clear how the current crisis will end,” they added.

‘No shortage of supply’

Reza Amanat, deputy editor of crude markets at Argus Media, told CNBC’s “Capital Connection” Tuesday that Brent crude futures were likely to average $64 a barrel this year.

“It is very difficult to look past this geopolitical tension that has built up now. It is a serious escalation,” he said.

Iran has said the White House made a “grave mistake” in giving the order to kill Soleimani, with the Islamic Republic’s supreme leader Ali Khamenei vowing to deliver “severe revenge” to those responsible.

Shortly thereafter, President Donald Trump warned Iran the U.S. would strike back if Tehran’s military forces attacked any American person or target, before adding Washington could do so “perhaps in a disproportionate manner.”

“There is always a risk of spiking oil prices,” Sven Reinke, senior vice president at Moody’s, told CNBC’s “Squawk Box Europe” on Tuesday.

But, given that there is “no shortage of supply” from the U.S., Norway and others over the coming months, he suggested WTI futures “should not go much higher” than $70 a barrel this year.

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