Iran-Israel Conflict Escalates: Oil Prices Surge, Global Economy at Risk

Even before the Iranian attack in response to the Israeli attack on the Iranian consulate in Damascus, oil prices began to rise. Brent barrel became more expensive by over 1% and crossed the $90 mark. In total, since the beginning of the year, oil has risen in price by 16%, including because of insurance for military risks related to the war in the Middle East.

A full-scale war between Iran and Israel could have a huge impact on the global oil market. Tehran has always said that if it feels it is a matter of survival, the first thing it will do is close the Strait of Hormuz. From the perspective of the oil market, this is the most radical scenario possible.

Through the Strait of Hormuz pass 20% of the global oil trade every day. In addition, one of the world’s largest suppliers of liquefied natural gas, Qatar, will also be blocked.

Most of the oil from Saudi Arabia, Iraq, Kuwait, gas from Qatar, some of Iran’s own oil will remain in the Persian Gulf. Even if this trade stops for just a few days, it will be a shock. Stock markets will react immediately, oil prices will jump to $150 and above per barrel, and most likely in this case trading will simply be suspended.

This is the most radical scenario from the point of view of the oil market. The reason will be the disruption of the supply chain. If Iran goes to war with Israel, the Houthis will not remain observers – they are allies of Iran and the Red Sea will also be closed. According to a Bloomberg analysis, if a full-scale war broke out between Israel and Iran, it would cost the world economy $1 trillion.

US President Joe Biden, who is fighting for re-election in the November election, will be hit especially hard if US gas station prices rise. The White House said Biden spoke by phone with Israeli Prime Minister Benjamin Netanyahu. The US president has said that Washington will not support retaliatory strikes against Iran, an unnamed White House official said. cited from Axios.

Other US officials also noted that Biden and his administration were “deeply concerned” that any two-pronged action could trigger a regional war with “catastrophic consequences”. Biden told Netanyahu that Israel had essentially won because much of the missiles and drones had been intercepted with the help of the US military in the region.