Middle Eastern crisis sends oil prices soaring
Brent crude’s price has gained momentum over the weekend, trading above $74/bbl, as tensions between Israel and Iran escalated to direct military clashes targeting key energy infrastructure.
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Over the weekend, the Israel Defence Forces (IDF) launched a series of targeted airstrikes on key Iranian energy facilities near Tehran, according to the official statement.
The IDF has struck two major oil depots in Tehran – Shahran fuel depot in northern Tehran and the Shahr Rey oil refinery – setting them ablaze following multiple explosions. Both the facilities were among the largest oil infrastructure sites in the capital.
Iran's oil ministry has confirmed that at least 11 storage tanks were destroyed following the explosions, according to media reports. The escalation of the conflict has targeted Iran’s oil and gas sector, which is already under heavy US sanctions.
Israel has also reportedly struck a part of Iran’s South Pars gas field, one of the largest in the world. Iran shared the gas field with Qatar.
“Commodities markets are focused on escalating geopolitical tensions between Israel and Iran, with the Middle Eastern conflict sparking a surge in oil prices,” two analysts from ING Bank noted.
Iran has retaliated with a barrage of drones and missiles towards multiple Israeli cities including the Haifa oil refinery in northern Israel. The strikes may lead to a broader regional conflict, adding risk premiums to Brent crude’s price, according to market analysts.
Critical shipping routes under threat, again
Concerns over using critical oil transit chokepoints in the region, including the Strait of Hormuz, Suez Canal, Gulf of Aden in Yemen, and the Bab al-Mandab Strait in the Red Sea, have resurfaced amid the brewing conflict.
UK-based maritime intelligence firm United Kingdom Maritime Trade Operations (UKMTO) has advised ship owners and charterers to “conduct thorough threat and risk assessments well in advance of entering the Arabian Gulf.”
The Strait of Hormuz, stretching between Iran and Oman, is a key oil shipping lane which transits about 20 million b/d of oil or roughly one-fifth of the global daily consumption, Reuters reports. Any closure of the strait could critically hurt the shipping and oil industries, analysts fear.
“As the situation remains fluid, pay close attention to the changing environment,” UKMTO said.
The Combined Maritime Force, a 46-nation naval consortium led by the US, has warned commercial vessels to avoid the region, Reuters reports. Officials from the UK and Greece governments have cautioned their commercial shipping companies of the same, the report adds.
“In a scenario where we see continued escalation, there’s potential for disruptions to shipping through the Strait of Hormuz, which is the biggest fear for the oil market,” ING Bank analysts noted.
By Aparupa Mazumder
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