Oil prices (CL=F, BZ=F) spiked in Thursday's trading session after President Biden revealed there are discussions taking place about Israel striking Iran's oil facilities. This comes after Prime Minister Benjamin Netanyahu vowed to retaliate against Iran's missile attack on Israel.

TP ICAP energy analyst Scott Shelton joins Catalysts to discuss the outlook for oil amid rising Middle East tensions.

Shelton believes that there is always a risk that oil prices could hit $100 per barrel. He tells Yahoo Finance, "We've seen a fair amount of buying of $100 strikes across the last couple of days. I think yesterday's Brent options for calls was a record. But I think it's more about hedging the upside than actually [thinking] it's going there."

He explains that there is "a ton" of spare oil capacity, estimating that Saudi Arabia has roughly 3 million barrels, the United Arab Emirates has 1.5 million barrels, and Iran has been exporting about 1.5 million barrels a day. Thus, he believes that oil hitting $100 per barrel is more of a "fear" than an imminent reality.

Libya has announced it will be restarting its oil production, which Shelton calls a "very important part of the balances" in the larger geopolitical backdrop. "We run numbers for what inventories are going to do in the fourth quarter, and before Libya came back, we had draws, which would bring us down to perilously low levels. And I think by adding Libya back, those draws are now gone and we have small builds ... It's significant that Libya is back."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl