Warnings Sounded Over Oil Price Spike if US Gets Involved in Iran-Israel Conflict
Soaring Oil Prices Forecasted if US Engages in Military Conflict, Warns Specialist
Let's dive into the potential oil price chaos that could ensue if the US jumps into the war between Tehran and Jerusalem. Experts are especially uneasy about the Strait of Hormuz.
If the Stars and Stripes tangle with the Islamic Republic, the oil price could soar above 100 big ones: "If the US actively engages in the war and the conflict escalates, oil and gas prices could skyrocket, as they have already risen since Israel's attack on Iran last Friday," warns Manuel Frondel, energy whiz at the RWI-Leibniz Institute, to the "Rheinische Post."
Just to give you an idea, the price of the Brent variety has already risen from 68 to 76 USD per barrel, according to Frondel. The Strait of Hormuz should concern us, as it plays a vital role in the transportation of Gulf states, accounting for a fifth of the world's oil exports. Iran, however, only accounts for a mere 2% of the world's oil demand.
The Strait of Hormuz: A Global Energy Artery
Don't overlook the importance of the Strait of Hormuz. This maritime passage, linking the Persian Gulf with the Gulf of Oman and the Arabian Sea, is crucial for global oil shipments. About 17 to 21 million barrels per day flow through it, making it a lifeline for global energy supply.
Potential Fallout of US Involvement in Iran-Israel War
If the US intervenes in the Iran-Israel conflict, tensions could escalate, increasing the likelihood of a blockade or disruption of oil traffic through the Strait of Hormuz. Iran has previously threatened to block the Strait during disputes with the US, and even the mere threat has caused oil prices to spike sharply.
Eye on the Oil Market
You might wonder how the global oil market fares. To be blunt, it's on thin ice due to limited spare production capacity, especially within OPEC nations, which are mostly based in the Persian Gulf and depend heavily on the Strait for exports.
If there's a disruption on this route, other producers (like the US) can't swiftly compensate, stirring fears of supply shortages and market turmoil. Under such circumstances, crude oil prices could reach eye-popping heights. Financial analysts estimated:
- Prices may skyrocket over $120 per barrel, potentially reaching $150 or more if the conflict lingers or escalates further.
- A two-month interruption could push prices beyond $120 a barrel, as suggested by Deutsche Bank.
- Goldman Sachs cautions that a prolonged closure could push prices well above $100 per barrel.
- ING Financial Services and other analysts warn that the geopolitical risk premium supported in the market already would fuel prices toward $120 per barrel or even higher in the event of severe disruption.
In a nutshell, US involvement in the Israel-Iran conflict could spark major disruptions in oil transit via the Strait of Hormuz, which very well could result in steep oil price surges. Analysts forecast Brent crude could head toward or exceed $120 to $150 per barrel depending on the severity and duration of the disruption.
The escalation of tensions between the US and Iran, potentially resulting from their involvement in the Iran-Israel conflict, might trigger changes in various policies. For instance, the community policy regarding oil supply and demand could tighten due to the unforeseeable impact on the global oil market. Moreover, the employment policy for those working within the oil industry might need to account for the volatility and uncertainty surrounding oil prices, which could skyrocket beyond the current $100 per barrel if the US actively engages in the conflict and the Strait of Hormuz experiences disruptions.
