"Brent oil prices touched USD 70/bbl on Monday as the tensions between Iran, Iraq and the US continued to escalate," noted ABN AMRO Senior Energy Economic Hans van Cleef and explained that oil prices' strong reaction is due to the fact that the region supply roughly 23 million barrels per day.

Key quotes

"As long as these tensions do not result in actual production disruptions, we judge that the upward pressure on prices will prove to be short lived. The forward curve pictures a steep backwardation, suggesting that the stress of possible supply constraints are anticipated to have only an effect in the very near term."

"Due to the global production oversupply – even despite an OPEC production cut – and ample global inventories as well as strategic oil reserves, there will be no shortages of oil in the near term. Furthermore, investors already extended their long positions since early December and are already therefore positioning for further price gains."

"If the tensions do not escalate, we expect that the market reaction will be short lived and oil prices will ease in the course of the coming weeks. In the unlikely event of an escalation which actually does affect oil production and exports in the region, oil prices will continue its rally. The first important technical resistance levels are USD 72-75 and USD 80/bbl."