Story By: Akua Oteng Amponsah
Global oil prices have surged by over 10% after Israel launched strikes against Iran, escalating tensions in the Middle East. Benchmark oil contracts, Brent Crude and Nymex light sweet, have been affected, with traders concerned about potential disruptions to oil supplies from the region.
The cost of crude oil has a significant impact on various aspects of the economy, from food prices to fuel costs. Analysts are now watching to see whether Iran will retaliate in the coming days.
“It’s an explosive situation, albeit one that could be defused quickly as we saw in April and October last year, when Israel and Iran struck each other directly,” Vandana Hari of Vanda Insights said. “It could also spiral out into a bigger war that disrupts Mideast oil supply.”
In a worst-case scenario, Iran could disrupt millions of barrels of oil per day if it targets infrastructure or shipping in the Strait of Hormuz, a critical shipping route that carries about a fifth of the world’s oil.
“What we see now is a very initial risk-on reaction,” Saul Kavonic, head of energy research at MST Financial, said. “But over the next day or two, the market will need to factor in where this could escalate to.”
The Strait of Hormuz, bounded by Iran to the north and Oman and the UAE to the south, is a vital waterway connecting the Gulf to the Arabian Sea.
Several dozen tankers are typically en route to or from the strait, transporting energy from major oil and gas producers in the Middle East to customers worldwide.
