As geopolitical tensions escalate, the specter of conflict between Iran and Israel casts a long shadow over global oil markets.
In 2024, amid growing concerns about stability, oil prices have surged by 20% due to both geopolitical unrest and strategic production cuts worldwide.
Notably, Brent crude has climbed 8% since March, signaling market sensitivity to these tensions.
April 13 marked a significant escalation, with Iran launching drone and missile attacks on Israel.
This aggression follows heightened alerts from U.S. intelligence on April 12, warning of potential Iranian strikes.
These developments sent shockwaves through the oil sector, propelling prices to a peak of $93 per barrel before stabilizing at $90.21.
This volatile scenario unfolds as oil prices were already trending upward, driven by fears of further conflict and sustained cuts by OPEC, of which Iran is a crucial member.
Iran’s strategic position amplifies its impact on the oil market, controlling the Strait of Hormuz—a vital artery for global oil shipments.
This narrow passageway channels 88% of the oil produced in the Persian Gulf.
The possibility of Iran closing the Strait of Hormuz looms large, a tactic previously threatened in 2019 after the U.S. increased its military presence in the Gulf.
Such a move could catapult oil prices to an estimated $110 per barrel, reflecting potential shortages and market panic.
The Strait’s closure would necessitate alternative routes such as the East-West pipeline across Saudi Arabia, capable of transporting 5 million barrels daily to the Red Sea.
Yet, this shift would likely inflate transport costs and diminish supply efficiency, underscoring the global dependency on this critical chokepoint.
As tensions mount, the world watches closely, aware that the outcomes here will resonate through the economies of nations near and far.