Oil markets may have to brace for ‘greater disruption,’ says strategist

Meanwhile, Washington continues to ratchet up the pressure on Tehran, with U.S. President Donald Trump on Monday labeling Iran’s Islamic Revolutionary Guard Corps a terrorist organization — the first time America has formally labeled another country’s military a terrorist group.

Tensions between the two countries have sizzled since the U.S. withdrew from a 2015 nuclear deal, known as the Joint Comprehensive Plan of Action, with Iran. The administration also reimposed sanctions on Tehran’s crude exports, dealing a blow to the Iranian economy.

Commenting on recent statements made by individuals such as U.S. Secretary of State Mike Pompeo on the “complete obliteration of Iranian exports,” Driscoll said that goal was “unrealistic” and “possibly even delusional.”

“As oil prices rise, it’s going to be harder to keep that oil off the market,” he said. “It will find an outlet.”

Driscoll said that in the “black swan event” that Tehran loses patience with Washington and attempts to close the Strait of Hormuz — a critical sea passage for crude oil shipments, it would result in the loss of a “critical choke point where 30 percent of the world’s oil and gas passes.”

Oil prices scaled to new 2019 highs on Monday, with the international benchmark Brent crude futures contract adding 1.1 percent to settle at $71.10 per barrel. U.S. crude futures also rose 2.1 percent to settle at $64.40 per barrel.

In Asian morning trade on Tuesday, prices continued their upward march, with Brent rising fractionally to $71.16 and U.S. crude futures 0.23 percent to $64.55 per barrel.

“When I was on the show a month ago, I said we are going to breach $70 on Brent but it will be short-lived,” Driscoll said.

“Well, let me amend that, I think this one has got a bit more legs,” he said. “Libya has come back into play, Iran, Venezuela, it’s all getting stronger.

— Reuters and CNBC’s Natasha Turak contributed to this report.