Iran-Israel conflict raises energy security concerns

Observer

16-06-2025

MUSCAT, JUNE 16
Hostilities between the Islamic Republic of Iran and the State of Israel have intensified in recent days, drawing heightened international attention to the potential implications for regional stability, energy security, and global economic performance. While diplomatic efforts are ongoing, economic experts and regional analysts continue to monitor developments with caution.
At the centre of international concern is the Strait of Hormuz — a critical maritime passage through which nearly 20 per cent of the world's crude oil and 25 per cent of global liquefied natural gas (LNG) are transported daily. A prolonged disruption to the Strait would pose significant risks to energy markets and the economies that depend on secure and stable trade routes.
However, analysts say the likelihood of a full closure remains limited. 'A complete shutdown of the Strait of Hormuz would not only have a profound effect on global markets but would also harm Iran's own economy,' said Azzah al Habsi, a prominent Omani economist, in a post. 'The majority of Iran's essential goods — including food, medicine, and other imports — pass through the Strait. Any disruption would come at great cost to all sides involved.'
NUCLEAR RISK RAISES ALARM
While maritime stability remains a central focus, experts are also warning of the far-reaching consequences that could result from a potential military strike targeting nuclear facilities. Though such an event remains hypothetical, its implications would be severe — both from a humanitarian and environmental standpoint.
'Nuclear sites are not constructed to endure direct military attacks,' Al Habsi noted. 'A strike of this nature could lead to the leakage of radioactive material, creating long-term health hazards across the region.' She pointed to historical precedents such as the 1986 Chernobyl disaster, where radioactive particles reached countries thousands of kilometres away, including Türkiye and the United Kingdom.
In the Gulf context, radiation fallout from such an incident could affect neighbouring countries, disrupt agricultural systems, harm ecosystems, and lead to lasting economic dislocation.
ECONOMIC IMPACT
In her analysis, Al Habsi outlined four possible scenarios based on current regional dynamics, each with distinct implications for oil markets, investor sentiment, and economic stability: First, a de-escalation scenario remains the most desirable outcome. This would involve the resumption of diplomatic dialogue and nuclear negotiations, allowing tensions to subside. In this case, global oil prices are expected to stabilise between $65 and $75 per barrel, and regional markets would likely benefit from reduced risk premiums and improved investor confidence.
Second, a contained conflict scenario envisions limited military exchanges without wider regional involvement. Under this condition, oil prices are likely to remain elevated in the $80 to $90 range. While energy flows may continue uninterrupted, sectors such as tourism, aviation, and logistics could experience short-term disruptions due to heightened security measures.
Third, a wider escalation scenario could emerge if regional actors become directly involved or if threats to maritime navigation in the Strait of Hormuz materialise. This would likely drive oil prices above $100 per barrel, trigger global market volatility, and impact supply chains beyond the energy sector.
Fourth, the most severe and unlikely scenario involves a direct strike on Iranian nuclear infrastructure. Such an escalation could result in radiation leaks, posing health and environmental risks across borders. Oil markets would respond with extreme volatility, and regional economies could experience large-scale asset repricing. This scenario would also lead to shifts in global energy partnerships and long-term realignments in investment flows.
Each of these scenarios reinforces the critical need for restraint, dialogue, and adherence to international law. Ensuring the stability of strategic maritime routes and the safety of populations throughout the region remains a shared responsibility.
OMAN REAFFIRMS SUPPORT FOR DIALOGUE
As a nation committed to regional peace, neutrality, and constructive diplomacy, the Sultanate of Oman continues to support efforts that promote de-escalation and mutual understanding between all parties. Oman has long advocated for the peaceful resolution of disputes and the preservation of maritime and environmental security in accordance with international norms.
'The preferred outcome is, without question, a peaceful resolution through dialogue,' Al Habsi concluded. 'Avoiding further escalation is in the interest of all countries in the region and beyond.'