(Picture: Reuters / AFP)
Global oil prices are surging.
It is the clearest signal yet that instability in the Middle East will spill over, after Israel’s bombardments on Iran – bolstered by US airstrikes on three nuclear sites – entered a second week.
A third of the world’s oil is derived from the region, with Saudi Arabia, Iran, Iraq, the UAE, Kuwait, and Qatar being the biggest fossil fuel suppliers, so any disruption will, of course, shake up the market.
Fears are also rising that the Islamic Regime could follow through on their promise to close the Strait of Hormuz – the most strategic oil chokepoint in the world.
And if things get uglier, security experts have told Metro that the oil could jump from the current price of $78.96 per barrel to as much as $120 in a ‘worst-case scenario’.
What is striking – and somewhat ironic – is that just 24 hours after the US hit Iran’s nuclear assets, Washington is now urging China to pressure Iran to keep the 103-mile stretch of ocean open…
Live oil prices: Why are they changing?
Oil prices surged to a five-month high as investors wait to see if Iran would retaliate against the US attacks on its nuclear sites.
A barrel of Brent crude oil – the benchmark price – jumped by around 1.53% to $78.19 a barrel as of around 7.15 CEST, while WTI rose 1.48% to $74.93 a barrel.
It is worth remembering that this is around the average price for 2024, but with Israel’s war only escalating, this may not be the end of it.
No oil sites have actually been struck in Iran, so the market is calmer than expected.
That said, if the Islamic Regime’s Supreme National Security Council does approve of the closure of the Strait of Hormuz, the oil price will jump even higher.
Yet for now, there is ‘no hint of disruption’, said Javier Blas, Bloomberg’s energy and commodities columnist.
He said: ‘Multiple oil tankers crossing the Strait of Hormuz this morning, both in and outbound. Not even a hint of disruption.
‘Oil loading across multiple ports in the Persian Gulf appears normal. If anything, export rates over the last week are higher than earlier in June.’
Global oil price forecast
Closing the Strait of Hormuz would have ‘the most profound impact’ on the global oil price and the stock market since the Iraq War.
Jason Pack, fellow at Royal United Services Institute (RUSI) and host of the Disorder Podcast, told Metro that it would be ‘such a committal step’ for Iran that it would indicate which way the war is going.
He said: ‘There are many reasons why the Iranians would not want to close it. For one, they would not be able to make any money from their oil.
‘Their allies, particularly China, would not want that. China is dependent on Iranian oil and their economy is already suffering.’
Closing the Strait of Hormuz also does not happen automatically – there is no barrier or another contraption to physically stop the passing of ships.
Instead, Pack explained that Iran would plant underwater mines or attack a tanker, for example, to signal it.
This would also force insurance premiums for vessels to ‘go through the roof.’
He added: ‘This would then cause oil to have to be taken on pipelines and trucks to the Mediterranean, and that would cause tremendous delays, and a lot of oil will not be produced as there are not enough storage facilities.
‘So there would be a huge price hit and the markets would go crazy.’
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