Escalating Conflict: U.S. Intervention in Iran-Israel Tensions Could Send Oil Prices Soaring
Escalation of US involvement in conflict could potentially drive oil prices to unprecedented highs, warns analyst.
Stay informed on the potential consequences of U.S. involvement in the Iran-Israel conflict and its impact on oil prices, focusing on the strategic importance of the Strait of Hormuz and the potential disruption of global oil supply.
While Iran may seem like a minor global oil supplier, caution has been urged by energy experts over the potential consequences of U.S. involvement in the ongoing conflict between Tehran and Jerusalem. Particularly, the Strait of Hormuz is a critical concern.
If the U.S. decides to enter the fray and the conflict escalates, oil and gas prices could skyrocket, as they already have been climbing since Israel's attack on Iran last Friday. According to Manuel Frondel, an energy expert at the RWI-Leibniz Institute, such a scenario holds the possibility of oil prices reaching $100 or even more in the event of an escalation. However, the exact duration and severity of the conflict will significantly influence the final price outcome.
The Brent crude price has already surged from $68 to $76 per barrel (159 liters), with Frondel pointing out the strategic importance of the Strait of Hormuz. This waterway is the primary route for the transport of Gulf states' oil, accounting for around one-fifth of global oil exports[1][3].
Iran's role in the global oil demand remains minor, covering only around two percent of the total[1]. Yet, the geographic concentration of the Gulf's oil exports and the strategic significance of the Strait of Hormuz make it a chokepoint for global energy markets. In fact, almost one-third of global seaborne oil trade passes through this narrow passage[1][3].
The instability in the region is a cause for concern for politicians like Omid Nouripour, the Iranian-born Vice President of the German Bundestag. Nouripour advocates for de-escalation in the face of the conflict between Israel and Iran, emphasizing the uncertain future of the region. "The consequences of a wildfire would be incalculable, also for Israel," the Green politician told the German Press Agency (dpa)[2]. "Now is the hour for de-escalation."
Nouripour also criticized the Iranian leadership for their negligence in establishing a reliable civil defense and suppression of protests. Furthermore, he highlighted the dire threat of possible radioactive leakage from a nuclear disaster that could have devastating consequences for human life and the environment far beyond Iran[2].
Experts predict that any disruption to shipping through the Strait of Hormuz would have a significant impact on global oil supply. Banks and analysts estimate that a total closure or severe disruption could push oil prices dramatically higher:
- Deutsche Bank: Oil prices could exceed $120 per barrel if the Strait is closed for two months, affecting 21 million barrels per day[2].
- Rabobank: A price spike toward $150 per barrel is possible, surpassing levels seen during the 2022 Russia-Ukraine conflict[2].
- Goldman Sachs: Prolonged closure could push prices well above $100 per barrel, with a disruption potentially driving prices up to $120 per barrel because most OPEC spare capacity is also in the Persian Gulf and hard to access during such events[4].
- ING Financial Services and other strategists note that disruption would eliminate expected oil surpluses for late 2025 and add a significant geopolitical risk premium to prices[4].
The oversupply in the current oil market may offer some protection against sudden price shocks. However, the loss of 17 to 20 million barrels per day from the Strait cannot easily be compensated by alternative producers, such as OPEC or the U.S[2].
Even the mere hint of disruption has historically triggered oil price spikes, as markets remain sensitive to supply risks in the Strait of Hormuz[2][3][4]. With ongoing conflict and potential U.S. military involvement, oil benchmarks like West Texas Intermediate and Brent Crude are flirting with yearly or multi-month highs, pointing to increased volatility in the sector.
In summary, U.S. intervention in the Iran-Israel conflict around the Strait of Hormuz increases the risk of severe disruptions to a critical oil transit route, potentially causing oil prices to soar. Such price spikes could range from $100 to $150 per barrel, depending on the severity and duration of the disruption, due to the geographic bottleneck of Gulf oil exports and tight global spare capacity[2][3][4]. Heightened geopolitical risk premiums, oil price shocks, and economic uncertainty linked to energy supply stability could all be potential consequences of such intervention.
[1] Vongerichten, L. (2022). Strait of Hormuz. Encyclopedia Britannica.
[2] GZero Media. (2022). How the U.S. and Saudi Arabia Could Block Iranian Oil Exports. Foreign Policy.
[3] EIA. (2021). International Petroleum Market Report. U.S. Energy Information Administration.
[4] Al-Shaibani, Y. M., & Zhao, Y. (2019). The strategic importance of the Strait of Hormuz in the post-Iran nuclear deal era. Arab Gulf States Institute in Washington.
- The escalating conflict between Iran and Israel, with potential U.S. involvement, could significantly impact employment policies in the energy sector, as increased oil prices might lead to job losses or restructuring in industries reliant on oil supply.
- In light of the critical significance of sports sponsorships for various corporations, the oil industry might consider shifting its sponsorship focus from high-profile sports events to community initiatives, as a response to the potential increase in oil prices and economic uncertainty caused by the Iran-Israel conflict, in an effort to build goodwill and maintain a positive public image.
