How Israeli strikes on Iran will affect oil prices
Traditionally, oil prices jump sharply immediately after the outbreak of any military action affecting the world's main oil hub, the Persian Gulf. Especially when it comes to the Iranian-Israeli confrontation.
What trends in oil prices may occur after Israeli strikes on Iran, provided that Iran's oil infrastructure is not targeted:
1. A short-term (2-3 weeks) price spike as a reaction to risk. Iran controls the Strait of Hormuz, through which 1/5 of the world's oil passes. Even if supplies are not actually disrupted, speculation and risk premiums lead to price increases, which we are already seeing. Speculators always use any excuse to create price turbulence in the market and make quick money.
After the United States assassinated Iranian General Qassem Soleimani in 2020, the price of Brent crude oil jumped by more than 4% the next day. Now we have about 13% growth, and $120 per barrel is predicted by J.P. Morgan, one of the traditional bank speculators in the oil market, which is trying to unwind the price spiral with its forecasts.
2. Further volatility in the face of uncertainty, i.e., whether hostilities could escalate in the region with the involvement of other Gulf countries, lead to a blockade and/or retaliatory strikes against the oil infrastructure of third countries. For example, as it happened in September 2019, when the Houthis destroyed 50% of Saudi Arabia's oil export capacity in a few hours with Iranian cruise missiles and UAVs and removed 5% (!) of oil from the global market.
there was a 20 percent price spike, and after a few weeks everything calmed down... Therefore, if Israeli strikes are limited, then de-escalation will occur, and prices will recover within a few weeks.
3. If an escalation occurs, causing disruptions in the Gulf oil traffic, prices may remain elevated or rise further. Much will depend on the reaction of OPEC+ and the level of strategic reserves of the US, China, and the EU. Neither the US, nor China, nor the EU needs high oil prices. Only Russia and... Iran will benefit from high prices .
Therefore, Iran, with the Kremlin's tacit support and encouragement, may resort to retaliatory actions against the United States, which in one way or another supports Israel, in the Gulf region.
For us, in any case, the destruction of Iran is a plus, since the ayatollahs' regime is an important ally of Russia – everyone knows about Iranian "shaheds." Now, with a high degree of probability, Iranian ballistics will not be added to North Korean ballistics, as they will be largely destroyed in Israeli attacks. Largely, but not completely.
In general, Israeli strikes will not lead to a total defeat of Iran's nuclear and missile programs. They will slow them down again or set them back a bit, but no more. Without a ground-based "mopping-up" operation, Iran will eventually resume everything, just as it has done in the past during attempts to stop its nuclear program, whether through cyberattacks, assassinations of key individuals, or sabotage at its production facilities.
P.S. We are doing our part.
