Table of Contents : Iran-Israel War
Summary
Iran-Israel War : The Ongoing tensions between Israel & Iran have raised a serious concerns around the globe, particularly in the global energy markets. Both nations – Iran & Israel are at the center of geopolitics in the middle east region and any armed conflict between these nations can send shock waves across the globe and global oil energy supply chain.
In this article lets explore lets explore how this war can affect the Global Energy Market.
Why Iran & Israel Matter To Global Oil Markets ?
Iran is one of the world top oil producers and proudly holds the worlds largest 4th largest proven oil reserves. Iran is also a member of OPEC ( Organization Of Petroleum Exporting Countries ). Although global sanctions have limited Iran’s oil supply in the recent years, but it still exports significantly to India, China and other Asian countries.
On the other hand, Israel does not have any significant oil reserves but holds a very strategic important location near the Suez Canal. These are choke points which are very critical for the smooth transportation of crude oil from Middle East to rest of Europe and the world.
Impact On Oil Prices : What Will Happen If War Breaks Out ?
Let us now discuss the impact on oil prices :
Disruption In Oil Prices
Chances are that, if a full fledge war breaks out between Iran & Israel, oil prices can spike up to 120 $ to 150 $ per barrel. The Middle Eastern region account for 30 % of the oil production and any disruption can lead to global oil shortages.
Closure Of Strait Of Hormuz
One of the biggest fear is that, Iran may block Strait Of Hormuz, which is a narrow waterbody through which nearly 20% of the world’s oil passes daily. Any war activity in this area could damage oil tankers and cripple the global oil supply chain.
Global Investor Panic
Even a small speculation can cause panic among global investors, which can force many investors to move their assets into gold and other safe investment options which can lead to oil market volatility and sharp price surge.
Global Economic Impact
A long and prolonged war between Iran & Israel can lead to serious consequences like Global Inflation especially in oil importing countries, It can also read to Recession in developing and developed countries. It can also cause supply chain disruptions in areas like chemicals, aviation and manufacturing sectors. All these disruption will lead to global slow down.
Can OPEC or U.S.A Stabilize The Prices In Case Of War ?
Incase of oil price surge OPEC+ countries may rise the oil production to stabilize the global markets. However this depends on how fast the OPEC+ countries can ramp up the process. USA on the other hand can release oil in the market to control the oil price shock.
Having said this no country in the world can immediately compensate the global oil disruption caused by middle eastern countries.
Conclusion
If Iran – Israel war further escalates this could lead to a global energy crises. Oil prices and other oil related industries are very sensitive to global geopolitical events happening around middle east region. While global diplomacy and strong intervention into this can stop this devastation. Oil importing countries around the globe must be always be prepared for such type of disruptions and economic downfall.
Extras
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