TLDR:
- Iran launched approximately 200 ballistic missiles at Israel on Tuesday
- The conflict is described as a “war of attrition” between Israel and Iran
- Experts anticipate targeted attacks and cyber warfare rather than traditional missile exchanges
- Oil prices surged following Iran’s attack, with Brent crude rising above $74 a barrel
- The Strait of Hormuz, handling 30% of world oil trade, could be a potential choke point in the conflict
Iran’s recent missile attack on Israel has heightened tensions in the Middle East and sent ripples through the global oil market. On Tuesday, Iran launched approximately 200 ballistic missiles at Israel, marking a significant escalation in the ongoing conflict between the two nations.
Carmiel Arbit, a member of the Middle East Programs at the Atlantic Council, described the situation as a “war of attrition” between Israel and Iran. This attack was seen as a response from Iran to recent Israeli actions, including strikes on Lebanon and the death of a Hamas political leader in Tehran in July.
The missile barrage, which included strikes over Hezbollah-controlled areas, was interpreted as a strong message from Iran. Experts anticipate that Israel will likely respond to this attack, raising concerns about further escalation. One key question is whether Israel might target Iranian nuclear facilities, which could be perceived as an existential threat by Iran.
Unlike traditional warfare characterized by back-and-forth missile exchanges, this conflict is expected to involve more targeted attacks and cyber warfare. Arbit suggested that Iranian leadership could potentially be the target of an Israeli strike, adding another layer of complexity to the situation.
The conflict has had immediate effects on the global oil market.
Following Iran’s attack, Brent crude oil prices surged by more than 5%, later stabilizing above $74 a barrel. This price increase reflects growing concerns about potential supply disruptions from the Middle East should hostilities continue to escalate.
Iran, a significant oil producer with an output of over 3 million barrels per day, plays a crucial role in global oil supply. The Strait of Hormuz, a narrow waterway at the mouth of the Persian Gulf through which nearly 30% of the world’s oil trade passes, is a potential choke point in this conflict. Any disruption to this vital shipping route could have severe implications for global oil supply and prices.
Analysts at Clearview Energy Partners have estimated that oil prices could climb by up to $7 a barrel if economic sanctions are placed on Iran by the U.S. and its allies. In the event of an Israeli strike on Iranian energy infrastructure, prices could rise by as much as $13 per barrel.
The most significant impact would come from a disruption to flows through the Strait of Hormuz, potentially driving crude prices $13 to $28 higher.
The oil market, which had previously held a bearish stance due to concerns about demand and oversupply, is now reassessing its position in light of these geopolitical developments.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) had been planning to increase output from December, but these plans may now be reconsidered given the current tensions.
In the event of major and prolonged disruptions in the Middle East, the United States might tap into its Strategic Petroleum Reserve, which currently holds about 383 million barrels. This significant stockpile could provide a cushion against supply shocks.
