Oil Prices Can React Sharply to Minor Changes in Supply and Demand

Nikolay Stoykov, Managing Partner at Alaric Securities, on “In Development”, Bloomberg TV Bulgaria

Following the tense events in the Middle East and the brief 12-day war between Israel and Iran, oil prices experienced significant volatility. The market reaction was predictable—a sharp initial spike in oil prices, followed by a decline once it became clear that the conflict would not escalate. Israel acted strategically, understanding that swift and decisive actions would lead to a short-term escalation and a quick ceasefire, commented Nikolay Stoykov, Managing Partner at Alaric Securities, on the program “In Development” with host Antonio Kostadinov.

Iran’s Limited Capacity to Sustain a Long-Term War

According to Stoykov, Iranian society itself would not support a prolonged war, especially considering the country’s current demographic and economic state. While Iran has the capacity to disrupt traffic through the Strait of Hormuz through mining, for example, it lacks the ability to enforce an actual embargo without incurring significant losses itself.“They simply don’t have the fleet or the air force to impose an embargo, especially given that they too would suffer as a result.”

Iran should not be equated with countries like North Korea – its economy is significantly more developed and integrated into global markets.

Oil Prices Sensitive to Small Supply-Demand Shifts

Regarding oil prices, Stoykov emphasized that even small fluctuations in supply and demand can lead to substantial price changes. Lifting the embargo on Iran, for instance, would not cause a dramatic shift in global supply, but it would allow Iran to secure better prices for its oil.

“At any moment, even small shocks in supply and demand can result in a two percent imbalance, leading to a $10–20 increase in oil prices. To reduce demand by about 2–3%, prices need to rise well above that more likely around 10–20% to dampen demand in the short term. What matters isn’t just whether there will be a conflict, but when it will occur.”

The Yuan’s Rise and Criticism of U.S. Monetary Policy

Stoykov also commented on the growing role of the Chinese yuan, stating that it has real potential to become the world’s second reserve currency—provided that Beijing allows it to be fully convertible. At the same time, he criticized U.S. Federal Reserve Chair Jerome Powell, describing his actions as “unjustified” and “based on fear without economic justification.”

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You can watch the full commentary in the video.

Source: BloombergTV Bulgaria