According to a report prepared by the “Financial Times” and viewed by the “Eqtisad Sky News” website, Israel is currently discussing with its American allies, directing strikes on Iranian oil facilities. This retaliatory option, although it has not occurred yet, has shaken the oil markets and raised fears that the region has become at risk. On the verge of an “oil war” that could threaten global oil supplies.
Experts believe that any Israeli attack that disrupts Tehran’s oil exports of 1.7 million barrels per day would have dire consequences on global energy markets, while any Iranian response to the expected attack would cause further unrest.
Is the Middle East on the brink of an “oil war”?
The Financial Times quotes analysts saying that such an uncontrolled cycle of attacks would risk rising prices for the world’s most important commodities, reigniting inflation and damaging the global economy weeks before the US elections.
According to Daniel Yergin, a Pulitzer Prize-winning energy historian, the current danger is that the conflict between Israel and Iran has become more aggressive, and the reaction between the two parties may become much greater than before, while Jason Bordoff, founding director of the Energy Policy Center, says Global University at Columbia University, said that the “most extreme” scenario, although the probability of it occurring is low and difficult to implement, is Iran strangling traffic through the Strait of Hormuz, the sea lane through which one of every five barrels of crude oil consumed in the world passes daily.
What impact do events have on oil prices?
Israel’s threat to target Iranian oil facilities led to a rise in Brent crude, the global standard, by 8 percent last week to nearly $78 per barrel, after energy markets witnessed a relatively quiet start last week, with demand from China slowing.
Henning Gloystein of the Eurasia Group says that Brent prices are unlikely to rise above $85 per barrel, if the confrontation remains limited to limited air strikes that do not hit Iran’s energy infrastructure, noting that successful Israeli attacks against Iranian oil assets would… It certainly pushes prices above $85 a barrel and perhaps towards $100, while if there is a major Iranian retaliation that would seriously impact shipping through the Strait of Hormuz Brent is likely to rise significantly.
Analysts from Citigroup believe that successful efforts to choke the Strait of Hormuz, although unlikely, would lead to a significant increase in oil prices, which would far exceed the previous record highs of $147.50 per barrel for Brent crude in 2008.
According to the Financial Times report, any rise in crude prices will ultimately be reflected in gasoline costs, which may negatively affect the Democratic Party in the US presidential elections in November 2024.
How can stability be achieved in the market?
The production cuts that took place two years ago to date, by OPEC+ producers, especially Saudi Arabia and the United Arab Emirates, mean that the group has more than 5 million barrels per day of spare capacity, which can be restored if Iranian supplies are suddenly disrupted, as Anne-Louise says. Hittle, Vice President of Oil Markets at Wood Mackenzie, said that this move constitutes a reassuring message to the market as we enter this very dangerous situation.
The Financial Times report notes that Western countries maintain large strategic reserves, which can be used to suppress price increases, while China, which is the destination of almost all Iranian oil, has worked to build its reserves, which may help mitigate any disruption in supplies.
On the other hand, it provides potential Shale oil Abundant in USA kind of stability for the markets, where producers can Oil Theoretically, increase production quickly to calm prices.
The Middle East is at a crossroads
Lori Haitian, an expert in oil and gas affairs, said in an interview with “Iqtisad Sky News Arabia” website, that the Middle East region is facing several scenarios, and each scenario depends on the size of the strike that Israel will direct against Iran. If Israel targets Iranian oil export facilities, This means that the market will face a shortage ranging in size from 1.2 to more than 1.5 million barrels of oil, which will have repercussions in the market, but they will not be large, indicating that this matter is due to the fact that the global economy, starting from China, passing through Europe, and reaching America, is in a state of contraction and not a state. Good, because there would be a large demand for oil and gas.
According to Haitian, what supports the market’s failure to react strongly to the exit of Iranian oil from the global equation is the awareness of observers that OPEC+, due to the policy of reducing production that it adopted during the past years, has a reserve capacity ranging between 5 and 6 million barrels per day, and therefore, if it There is a need to pump more oil into the market. These precautions can be used, pointing out that Israel, in order not to cause an escalation whose consequences will be reflected in the global economy, may direct its strike at Iranian oil facilities designated for production intended for internal use, and this will create problems and confusion inside Iran, with interruptions. The local market of petroleum derivatives.
The oil expert stressed that what must be watched is Iran’s reaction to the Israeli strike, as Tehran could target Israeli oil facilities, to create a state of confusion inside Israel, with Tel Aviv forced to close all oil and gas facilities in the country, noting that Israel has prepared itself for the scenario of closing energy production facilities in the country, and using the alternative of continuing the availability of electricity to its citizens, as this scenario would be a blow to the Israeli economy with a decline in revenues from oil, and the closure of Israeli oil facilities may negatively affect Egypt and Jordan in terms of power outages. electricity in the country.
Haitian considered that Israel’s implementation of a very large strike on Iran may prompt the latter to obstruct transit traffic Strait of HormuzThe repercussions of this step will be the disruption of about 30 percent of the global oil and gas market’s needs.
