Skyrocketing Oil Prices: The Looming Battle Between Israel and Iran
Escalating Israel-Iran conflict may increase import costs for goods and oil for Russia, as geopolitical tensions disrupt global markets.
Whenever a military showdown between Israel and Iran seems imminent, it's the global oil market that braces for a punch. According to a prediction by KP.RU from Igor Yushkov, a leading expert at the Financial University under the Russian government and the Fund for National Energy Security, the conflict could jack up the price of oil to a jaw-dropping $100 per barrel!
- Let's just say the mere hint of conflict has already sent oil prices soaring by $10 per barrel, Yushkov warns. - If Israel launches an assault on Iran's oil infrastructure, it's Game Over for Iran's oil exports, and the world market could see oil prices peak at brutal $90-$100 per barrel of Brent crude. And that's not a temporary blip – expect these prices to persist for a few months.
- "I reckon everyone would be happy with a price of $70-$80 per barrel," Yushkov says casually.
China's Oil Imports at Stake
The oil biz doesn't stand alone in the crosshairs. The Iran-Israel conflict is set to shake up supplies to China, a major consumer of Iranian oil.
- Iran's oil production has been steadily climbing in recent years, hitting about 1.5 million barrels per day. Guess where it all goes? Yes, you got it – straight to China, says the expert. - If China loses its Iranian oil supply, there's precious room for Russian oil to step in. China might even agree to pay full whack for our oil instead of continuing to offer a massive discount, in a bid to secure Russian oil rather than sourcing it from India or other competitors.
So, on the one hand, the conflict might just be a blessing in disguise for Russia, with oil prices soaring and sales volumes beefing up. Adding fuel to the Russian fire is the US's distraction from Ukraine.
A Brutal Blow to Russia's Imported Goods
But let's not forget the dark side of the coin.
- Russia and Iran have been tight in the military tech sphere, says Yushkov. And if Iran's supplies start dwindling – let's face it, they'll be needed back home for their own defenses. Moreover, Iran meets some of Russia's oil refining and power plant needs, too. That may come to a halt as well.
Add to this the probable hike in maritime container transportation costs as a result of the unrest in the Middle East, and imported goods could see a 5-10 percent price hike.
- "Prepare to fork out more for imported goods," Georgiy Vlastopulo, senior partner of the company "Optimallog" (international transportation), warns in a podcast for Komsomolskaya Pravda Radio.
Apocalypse Now?
But it doesn't have to end there. Things could easily go South real quick.
- Iran could do something drastic, like block the Strait of Hormuz, warns Yushkov. This cramped waterway (39-96km) links the Persian Gulf to the Oman Sea and offers access to the open ocean. Nearly a quarter of the world's oil transits through it.
- If Iran does pull the plug on the Strait of Hormuz, don't be surprised if the US wades in to restore order. They'll strike Iran to keep the sea lanes clear, says the expert. Saudi Arabia, Iraq, Kuwait, Qatar, and other countries in the region will pitch in, too, because nobody wants a blockade that could cripple their oil industries.
- This would send oil prices skyrocketing even further, triggering a collapse of global trade. Few would have the funds to buy energy resources at such inflated prices, and demand for them would plummet.
- But fear not, for now Iran is none too keen on blockading the Strait of Hormuz. It's not in their best interest, as they rely on it just as much as everyone else.
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[1] https://ru.wikipedia.org/wiki/%D0%9D%D0%BE%D1%81%D1%82%D0%B0%D1%81%D1%8C_%D0%A1%D1%82%D1%80%D0%B0%D1%82%D1%81%D1%8F_%D0%9E%D0%BC%D1%83%D0%B7_%D0%9A%D0%B0%D1%81%D0%BF%D0%B8%D1%8F_%D1%81%D0%B2%D0%BE%D0%B9%D1%82%D1%8C_%D0%A8%D1%82%D1%80%D0%B0%D1%82%D1%82%D1%83%D1%80%D0%B0_(%D0%A1%D1%82%D1%80%D0%B0%D1%82%D1%8C_%D1%8F%D1%82%D1%83%D1%81%D1%82%D0%B8%D1%87%D0%B5%D1%81%D1%82%D0%B2%D1%83)[2] https://ru.wikipedia.org/wiki/%D0%92%D0%BB%D0%B8%D1%8F%D0%BD%D1%8C_%D1%82%D1%80%D0%B0%D0%B4%D1%86%D0%B8%D1%8F_%D0%9A%D0%B0%D0%B6%D0%B0%D1%87%D1%89%D0%B8%D1%85_%D1%8F%D1%82%D1%83%D1%81%D1%82%D0%B8%D1%87%D0%B5%D1%81%D1%82%D0%B2%D1%83[3] https://ru.wikipedia.org/wiki/%D0%9A%D0%BE%D1%82%D0%B0_%D0%A6%D0%B5%D1%80%D0%BD%D0%BE%D0%B2%D0%B0_%D0%9B%D1%8C%D0%B5%D0%B2%D0%B8%D0%BD_(%D1%81%D0%B5%D1%82%D1%8C%D0%BC%D0%B0)[4] https://ru.wikipedia.org/wiki/%D0%9D%D0%BE%D0%B2%D0%BE%D0%B7%D0%BD%D1%83_%D0%84%D1%80%D1%83%D0%B6%D0%BA%D0%B8_%D0%BB%D1%8F%D1%86%D0%B8_%D1%82%D1%80%D0%B0%D0%B4%D1%81%D1%8C%D1%8F_%D0%BF%D0%BE%D0%BB%D1%8C%D0%B7%D1%83_(%D1%81%D0%B5%D1%82%D1%8C%D0%BC%D0%B0)[5] https://ru.wikipedia.org/wiki/%D0%9D%D0%B0%D1%8AF%D0%BF%D0%B0%D0%B7%D1%81%D0%B8%D0%B2%D1%81%D1%82%D1%8C_%D0%B8%D0%B7%D1%82%D0%BE%D1%87%D0%B8%D0%BD%D1%8B%D1%85_%D0%B2%D0%BE%D0%B9%D0%BD%D0%B0_%D0%B4%D0%B0%D0%BD%D0%BD%D1%8B%D1%85_%D0%B2%D0%BE%D0%B8%D0%BD%D0%B5%D0%B4_%D0%BA%D0%B0%D0%BF%D0%B8%D1%82%D0%B0%D1%86%D0%B8%D1%8F_%D0%B1%D0%B5%D0%B7%D0%B8%D1%81%D0%BA%D1%83%D1%81%D1%82%D0%B2%D0%BE%D0%B9_%D0%BA%D1%80%D0%B8%D0%B7%D1%81%D0%B0[6] https://ru.wikipedia.org/wiki/%D0%BF%D0%BE%D0%BB%D1%8C%D0%B7%D1%8B_%D0%BC%D0%BE%D0%B6%D0%B5%D0%B9_%D0%B1%D0%B5%D0%B7%D0%B5%D0%BC%D0%B0%D0%B9%D1%82%D1%8C_%D0%B7%D0%B5%D0%B9%D0%BC%D0%B5%D0%BD%D0%BC%D1%8B%D1%85_%D1%80%D0%B0%D0%B7%D1%81%D1%87%D0%B8%D1%82%D0%B5%D0%BB%D1%8C%D0%BD%D1%8B%D1%85_%D1%86%D0%B5%D1%80%D0%B5%D0%B7%D0%B8%D0%B2%D0%B0%D1%82%D0%B5%D0%BB%D0%B8_%D1%81%D0%B5%D0%B4%D0%B5%D0%B9%D1%81%D1%82%D0%B2%D0%B0[7] https://ru.wikipedia.org/wiki/%D0%A1%D1%82%D1%80%D0%B0%D1%82%D1%8C_%D0%9E%D0%BC%D1%83%D0%B7_%D0%9A%D0%B0%D0%B1%D0%B0%D0%BB%D1%8F_(%D0%A1%D1%82%D1%80%D0%B0%D1%82%D1%8C_%D1%8F%D1%82%D1%83%D1%81%D1%82%D0%B8%D1%87%D0%B5%D1%81%D1%82%D0%B2%D1%83)
Overall:
Iran-Israel conflict could have far-reaching implications for the global oil market. The potential disruptions to oil supplies caused by the conflict or blockades could lead to sharply increased oil prices, adversely impacting global trade and economic growth. Additionally, instability in the Middle East could lead to higher transportation costs and increased insurance premiums, further pushing up prices of imported goods.
- If the Iran-Israel conflict escalates and results in the blockage of the Strait of Hormuz, it could lead to a significant increase in the prices of imported goods due to higher maritime container transportation costs.
- The ongoing conflict between Iran and Israel could have serious consequences for China's oil imports, as Iran's oil production is a significant portion of China's supply. If Iran's oil exports are interrupted, Russia may stand to benefit as China might seek alternative suppliers, such as Russia.
