The price of oil moves to the beat of the drums of war in the Middle East. Israel is considering how to respond to Iran’s ballistic missile attack on Tuesday, and while it appears Iran’s nuclear facilities won’t be attacked, indications are the country has its eyes on the industry Iranian oil company, its enemy. the largest producers of energy resources in the world. The latest statements by Joe Biden, President of the United States, confirm that the possibility of attacking Iranian oil installations is under debate, and that the price of oil is suffering this Thursday: after learning of Biden’s statements, the Brent The European currency rose more than 5% and reached $77.6, a new high for the year.
The US president’s statements to the media at the White House came a day after he denied the possibility of Israel attacking Iranian nuclear facilities. For Biden, Israel’s response to its enemy’s attack must be “proportionate”, hence his refusal to support an offensive against the Shiite country’s nuclear industry. However, it seems that the American government does not take a dim view of the possibility of targeting the country’s oil.
If Israel attacks Iran, the consequences for oil will be enormous. Iran is the world’s seventh largest producer, producing almost 4 million barrels per day, or almost 4% of global crude oil production, and the country has unquestionable power in the oil value chain, both in terms of production than oil. refinement and logistics. From S&P Global they reported that they have a refining capacity of 2.4 million barrels per day distributed across ten plants in the country. “It’s one of the largest refining sectors in the entire Middle East.” In this sense, its factories have a large capacity, those of Isfahan, Abadan and Bandar Abbas exceeding 300,000 barrels per day. Therefore, an attack could be a major blow to global crude oil supplies.
Goldman Sachs explains in a report published yesterday that beyond refining, the real danger lies in logistics. 25% of the world’s crude oil passes through the Strait of Hormuz. A stronger escalation therefore poses a great risk that Iran will obstruct transit or, even in the event of a major escalation, block passage. Trade disruption would be “an unlikely end scenario”, but it is the scariest for markets and any further escalation makes it more real.
In this sense, concern is growing after Biden confirmed the threat made earlier today by Benjamin Netanyahu, promising that Iran would “pay” for the attack. Capital Economics commented that “there are growing fears that nuclear and oil facilities are under attack.” In this sense, the company’s experts point out that this will have economic consequences “if there are stoppages in the facilities or attempts to interrupt the strait, the oil increases will continue and the Brent could reach $90-$100 if further escalation occurs.”
