Oil Prices Rise as US Strikes Iran, Middle East Tensions Grow

Oil prices rose more than 2% as soon as trading began, after the U.S. announced direct attacks on Iran. This increased fears about oil supply from the Middle East.

On Saturday, President Donald Trump shocked the market when he announced that the U.S. had launched attacks on three Iranian nuclear sites — Fordo, Natanz, and Isfahan — as part of the growing conflict between Israel and Iran.

President Donald Trump on Saturday surprised markets with the announcement that Washington had directly entered the Iran-Israel conflict, launching attacks against three Iranian nuclear sites in Fordo, Natanz and Isfahan. (Iran, US airstrike, West Asia conflict)

Investors are now looking to see how Iran will respond to the unprecedented U.S. strikes. Iran’s foreign minister said Sunday the Islamic Republic reserves “all options” to defend its sovereignty. The initial rise in oil prices could ease if Iran does not respond, according to S&P Global Platts. (crude oil, oil prices, Iran, West Asia conflict)

Strait of Hormuz

The oil market’s worst-case scenario would be if Iran tried to shut the Strait of Hormuz, energy analysts say. Approximately 20 million barrels per day of crude, or 20% of global usage, passed through the strait in 2024, the Energy Information Administration reports. (crude oil, Strait of Hormuz, global oil market)

Iranian state media announced that Iran’s parliament had supported closure of the strait based on a senior lawmaker. The national security council of Iran, though, has the last word in closing the strait, as per the report. (Iran, Strait of Hormuz, oil prices)

U.S. Secretary of State Marco Rubio has warned Iran against attempting to close the strait. It would be “economic suicide” for the Islamic Republic because their exports pass through the waterway, Rubio said. (US airstrike, Strait of Hormuz, Middle East)

“We retain options to deal with that,” Rubio told Fox News in an interview Sunday. “It would hurt other countries’ economies a lot worse than ours. It would be, I think, a massive escalation that would merit a response, not just by us, but from others.” (Iran, Middle East, global oil market)

Iran produced 3.3 million bpd in May, according to OPEC’s monthly oil market report released in June, which cites independent analyst sources. It exported 1.84 million bpd last month, with the vast majority sold to China, according to data from Kpler. (crude oil, oil prices, Iran, global oil market)

Rubio called on China to use its influence to prevent Tehran from closing the strait. About half of China’s waterborne crude oil imports comes from the Persian Gulf, per Kpler. (Strait of Hormuz, oil prices, India oil imports, energy supplies)

“I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil,” Rubio said. (crude oil, global oil market, Middle East)

Investors are also watching the odds of a further destabilization of the Iranian regime as a result of U.S.-Israeli hostilities, given the example of the long-spanning impact that the 2011 NATO-led ousting of Muammar Gaddafi had on Libya’s supplies. (West Asia conflict, global oil market, energy supplies)

Regional tensions

Tensions have also increased in Iraq, OPEC’s second-largest oil producer, where pro-Iran groups have warned the U.S. not to attack Iran’s top leader, Ayatollah Ali Khamenei.

On Sunday, Iran’s Revolutionary Guard warned that “the US bases in the region are not their strength but rather their greatest vulnerability” without specifying particular sites, according to Google-translated comments carried by Iranian news agency Fars. (US airstrike, West Asia conflict)

Fledgling, but revived diplomatic ties between former rivals Iran and Saudi Arabia could meanwhile diffuse the possibility of disruptions in the supply of the world’s largest crude exporter. (Middle East, oil prices, global oil market)

Also Read :

https://thefirstcritic.com/salman-khan-reveals-hes-battling-trigeminal-neuralgia-avm/

“The Kingdom of Saudi Arabia is following with deep concern the developments in the Islamic Republic of Iran, particularly the targeting of Iranian nuclear facilities by the United States of America,” the Saudi foreign ministry said on Sunday. Riyadh, a close U.S. ally in the Middle East, has limited its involvement in the Iran-Israel offensives. (Iran, US airstrike, oil prices, global oil market)

Back in 2019 — four years before resuming diplomatic relations with Iran — Saudi Arabia’s oil installation facilities at Abqaiq and Khurais sustained damage during attacks that were claimed by the Houthis, but for which Riyadh and the U.S. said Iran bore responsibility. Tehran denied involvement. (crude oil, Brent, Middle East)

At the resumption of Israeli-Iranian fire last week, the International Energy Agency’s chief Fatih Birol said the institution was monitoring the developments and that “markets are well supplied today but we’re ready to act if needed,” with 1.2 billion barrels of emergency stocks on standby. (global oil market, fuel reserves, Middle East, Hardeep Singh Puri)