Oil prices could skyrocket if Iran-US tensions escalate
Some analysts expect oil to reach US$ 250 a barrel. Blocking the strait could cut global oil supplies by sea by up to 17 million barrels a day. However, a head-on confrontation on crude remains remote. At present, prices are stable around US$ 77.
Tehran (AsiaNews) – Crude oil prices could jump as high as US0 a barrel if Iran goes ahead with its threat to close the Strait of Hormuz in response to growing US pressure on its allies and others to cut their purchases of Iranian oil to zero.
US sanctions, including on oil, should kick in on 4 November. Between now and then, the US plans to increase diplomatic and trade pressure on Beijing and New Delhi, the main importers of Iranian oil along with Iraq and Turkey.
Iran had started to export again, especially oil, after signing the 2015 Joint Comprehensive Plan of Action (JCPOA), the brainchild of then US President Barack Obama, a deal agreed to by Iran and the P5+1 (the five permanent members of the United Nations Security Council—China, France, Russia, United Kingdom, United States—plus Germany), and the European Union.
Artem Avinov, a broker with TeleTrade, sees prices skyrocketing to US$ 250 a barrel if the Strait of Hormuz is blocked, disrupting about 17 million barrels per day in seaborne oil trade; however, he noted that this is not likely to happen, suggesting instead that Iran is more likely to opt for "a quick economic or military retaliation".
Another analyst, from Global FX, said he expected prices to hit US0 per barrel in the event of a Hormuz blockade.
Expectations of a sharp increase in international oil prices are normal in the current geopolitical situation, and yet these expectations tend to be predominantly hypothetical.
Few observers seem to believe that Iran will actually go all the way and – for the first time in history – make good on its threat to close off Hormuz.
What's more, the US Fifth Fleet is stationed right there to ensure the safe passage of oil cargoes from its Arab allies in the Middle East.
For Washington, any attempt to block the strait would be a casus belli and would end up raising the price of oil.
For now, prices seem stable, with Brent hovering around US$ 77 a barrel. Upward pressure caused by the prospect of Iran sanctions was met and offset by downward pressure from the tariff spat between the United States and China, with everyone now expecting China to announce tariffs on crude oil imports.