What the US–Israeli strikes on Iran mean for the price of oil
A halt on trade flows through the strait of Hormuz could spell trouble for many developed economies US-Israel war on Iran – latest updates The US-Israeli war on Iran has ignited fears that escalating military aggression in the Middle East could send oil prices soaring, push up prices at the pump and drive a global economic downturn. The US began “major combat operations” in Iran on Saturday mornin
For years, Tehran has warned that it could use its location to shut the strait in retaliation to military aggression against Iran, but has stopped short of a prolonged block on the trade route. Experts believe this time may be different.
Jorge León, the head of geopolitical analysis at Rystad Energy, said Iran had retaliated in a “far more aggressive and expansive manner than in prior exchanges” which “marks a structural widening of the conflict beyond contained or symbolic strikes”.
Ajay Parmar, a director at the energy market specialists ICIS, said: “Shutting the strait would be a last resort tactic for Iran. We would expect to see this in a hot war scenario.”
León added:“Whether the strait is closed by force or rendered inaccessible by risk avoidance, the impact on flows is largely the same.”
Tankers are already reportedly “stuck” in the narrow waterway. According to Reuters, an official from the EU’s naval mission Aspides said on Saturday that although Tehran had not confirmed a formal shutdown of the strait, Iran’s Revolutionary Guard had warned tankers not to pass.
These tankers include a vessel chartered by Centrica, the owner of British Gas, containing a spot market cargo of liquified natural gas (LNG) from Qatar. The destination of the vessel is not certain, although it may have been en route to Asia. A Nigerian vessel due to arrive in Qatar on 5 March before importing LNG to Europe aborted the trip before arriving in the strait.
Tamsin Hunt, a senior analyst at S-RM, a global intelligence and cybersecurity consultancy, said” “Closing the strait in full would be devastating for Iran’s own economy, as it would mean halting all its exports of oil and other goods.
“Iran would likely only close the strait as a last resort if the regime feels its core survival is under threat.”
Parmar added that Trump would also hope to avoid an escalation that causes global oil prices to rocket, raising costs for US voters before the country’s midterm elections in November.
But a full closure of the strait is not the only tactic at Iran’s disposal. Hunt said: “Vessels could face potential signal jamming, detentions of ships and crew, firing of warning shots, and sea mines that would partially obstruct the strait.
“Even small disruptions would have an outsized impact on the global oil sector, with delays, diversions, and increased insurance and freight costs likely to drive global prices up.”
