Energy markets are poised to be the next battlefield in the spiraling Israel-Iran conflict
After Israel decimated Iran's military in its initial wave of air strikes, reports on Saturday indicated Iranian energy infrastructure was under attack. Meanwhile, Tehran warned that closing the Strait of Hormuz, a critical chokepoint in the global energy trade, was under consideration. Oil prices spiked on Friday, and escalation of the Israel-Iran conflict could send them higher.
The Israel-Iran conflict is poised to include economic targets as both sides seek leverage in the rapidly escalating series of attacks.
After Israel decimated Iran's military in its initial wave of air strikes, reports on Saturday indicated Iranian energy infrastructure was under attack. That includes the Pars South gas field, considered to the world's largest reservoir of natural gas, as well as oil refineries.
That comes as Israeli Prime Minister Benjamin Netanyahu warned on Saturday that, 'We will strike every site and every target of the ayatollahs' regime,' after he earlier urged the Iranian people to overthrow their government.
On Friday, Israel's defense minister said Iran crossed 'red lines' by launching its missiles at civilian areas as part of its retaliatory attacks.
Former Deputy Secretary of State Wendy Sherman told Bloomberg TV that she believed that's a signal Israel will target Iran's oil and economic infrastructure.
Meanwhile, Tehran's retaliation could similarly extend into energy markets. Despite Iran launching hundreds of missiles and drones at Israel, analysts have noted that it has few viable military options and its overall capabilities have been severely degraded by Israel.
An Iranian lawmaker said closure of the Strait of Hormuz, a critical chokepoint in the global energy trade, was under serious consideration. The equivalent of 21% of global petroleum liquids consumption, or about 21 million barrels per day, flows through the strait.
That could spike oil prices even higher after they jumped 7% on Friday to more than $70 a barrel as markets reacted to the early stages of the Israel-Iran conflict.
In a note on Saturday, George Saravelos, head of FX research at Deutsche Bank, estimated that the worst-case scenario of a complete disruption to Iranian oil supplies and a closure of the Strait of Hormuz could send oil price above $120 per barrel.
Such a closure might entail use of mines, patrol boats, aircraft, cruise missiles and diesel submarines, while clearing the strait could take weeks or months.
'Given the significant global implication of such a closure, we believe that potential closure of the Strait is likely to be kept as last resort leverage and only to be considered in extremis,' Saravelos added.
In a column in Foreign Affairs magazine on Friday, Kenneth Pollack, a former CIA Persian Gulf military analyst and former director for Persian Gulf Affairs at the National Security Council, said there's a low likelihood Iran would close the strait.
That's because Iran would quickly go from a 'sympathetic victim to a dangerous nemesis in the eyes of most other countries,' while Western countries and perhaps even China would use force to reopen the strait, he predicted.
'And Tehran would have to worry that such a reckless threat to the world's economies would convince Washington that the Iranian regime had to be removed,' Pollack added. 'That fear is surely greater with U.S. President Donald Trump—who ordered the death of Iranian general Qassem Soleimani in January 2020—back in office.'
This story was originally featured on Fortune.com
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Wall Street Journal
37 minutes ago
- Wall Street Journal
Iran Says No to Nuclear Talks With U.S. — For Now
Iran's Foreign Minister Abbas Araghchi told European Union foreign-policy chief Kaja Kallas that Tehran isn't going to engage in nuclear talks with the U.S. for now, a person briefed on the call between the two officials on Saturday said. Araghchi said there would be no talks tomorrow, referring to the expected sixth round of nuclear negotiations between Iranian and American officials in Oman on Sunday, the person said. The person added that Araghchi didn't appear to be closing the doors to talks in the future if the Israeli attacks end, with the Iranian foreign minister blaming the U.S. for the current situation. Kallas is also the head of the committee that oversees the 2015 nuclear accord under a U.N. mandate.
CNN
an hour ago
- CNN
Israel town of Bat Yam came under Iranian missile attack
CNN's Nic Robertson shows aftermath of deadly Iranian missile attack in a residential area in the central Israeli city of Bat Yam. The death toll in Israel from overnight strikes by Iran has risen to at least 10, as emergency workers on the ground continue search and rescue operations.
Fox News
an hour ago
- Fox News
Trump promises to respond with 'full strength and might' of US military if Iran attacks America
U.S. President Donald Trump on Sunday said the U.S. had "nothing to do with" Israel's attack against Iran but warned that any attack against the U.S. would be met with the "full strength and might" of the U.S. military. "The U.S. had nothing to do with the attack on Iran, tonight," Trump wrote on Truth Social in the early morning hours of Sunday. "If we are attacked in any way, shape or form by Iran, the full strength and might of the U.S. Armed Forces will come down on you at levels never seen before," he continued. "However, we can easily get a deal done between Iran and Israel, and end this bloody conflict!!!" Trump's comments came hours after the Israel Defense Forces claimed responsibility for a series of strikes on the headquarters of the Iranian Defense Ministry and a nuclear project, while Tehran unleashed a fresh barrage of deadly strikes. "The IDF completed an extensive series of strikes on targets in Tehran related to the Iranian regime's nuclear weapons project," the IDF wrote on X. "The targets included the Iranian Ministry of Defense headquarters, the headquarters of the SPND nuclear project, and additional targets, which advanced the Iranian regime's efforts to obtain a nuclear weapon and where the Iranian regime hid its nuclear archive." Despite Trump's statement, Iran says it has evidence that the U.S. was involved in the attack. "We have solid proof of the support of the American forces and American bases in the region for the attacks of the Zionist regime military forces," Iranian Foreign Minister Abbas Araghchi told foreign diplomats in a meeting broadcast on state TV. The attacks traded by Israel and Iran represented the latest violence since a surprise offensive by Israel two days earlier seeking to decimate Tehran's nuclear program. At least 10 Israeli victims were killed and at least 180 were injured in Iranian missile strikes overnight, while casualty figures were not immediately available in Iran, where Israel targeted Tehran's Defense Ministry headquarters as well as locations it alleged were associated with the country's nuclear program. The Israeli military alleged the locations were "related to the Iranian regime's nuclear weapons project." U.S. intelligence agencies and the International Atomic Energy Agency have repeatedly said Iran was not pursuing a nuclear weapon before Israel unleashed its offensive targeting Iran starting on Friday. Iran's paramilitary Revolutionary Guard claimed that Iranian missiles targeted fuel production facilities for Israeli fighter jets, although this has not been acknowledged by Israel. Planned negotiations between Iran and the U.S. over Tehran's nuclear program were canceled amid the ongoing conflict in the Middle East, raising questions about when and how an end to the fighting could come.
