Are oil prices truly reflecting the geopolitical risks in the Red Sea?

<p>Analysts at J.P. Morgan are estimating that currently there is no geopolitical risk premium in oil prices, despite all the attacks on the Red Sea:</p><ul><li>Shipping disruptions are "easily handled"</li><li>rerouting tankers around the southern tip of Africa adds only $2 a barrel to oil prices</li><li>Gulf Arab states rely extensively on overland pipelines </li></ul><p>The Wall Street Journal (gated) followed up on this with snippets from other bank analysts:</p><ul><li>Lack of oil supply disruption: No major interruptions have occurred, and this "explains much of the sanguine response in the oil market," wrote Caroline Baine, chief commodity strategist at</li><li> Capital Economics says there have been no major interruptions to oil supply </li><li>Macquarie says the Houthi attacks are about crating fear, not about inflicting significant damage to specific targets</li><li>Deutsche Bank cite improved missile defenses in the region that may reduce the likelihood of damage to oil production facilities</li></ul><p>Standard Chartered take a less optimistic view:</p><ul><li>traders have perhaps become too complacent … there is an increased risk of a more direct U.S.-Iran confrontation in any of several key areas across the Middle East and we think that the combination of [Brent below $80 a barrel] and low volatility does not adequately capture that risk.</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.