Rising tensions between Iran and Israel threaten oil prices
Oil prices could rise by $20 (CAD 27) per barrel if Iran's production declines, according to analysts at Goldman Sachs. Iran produces nearly four million barrels of oil daily, representing almost 4% of the global supply, as emphasized by CNBC. The world is watching Iran and Israel closely.
As a member of OPEC, Iran is a significant player in the global oil market, producing 4 million barrels daily. CNBC highlights that last Thursday, futures contracts for American oil rose by nearly 5%. Another increase occurred on Friday amid fears of a potential Israeli strike on Iran.
- Estimates show if there is a sustained reduction in Iranian production by one million barrels per day, oil prices could increase by $20 (CAD 27) a barrel next year, - assessed Daan Struyven of Goldman Sachs, as quoted by CNBC. The analyst added that OPEC+ might refrain from increasing production.
The increase in price per barrel could be limited to $10 (CAD 13.5) if the United Arab Emirates and Saudi Arabia compensated for some of the production losses.
Anniversary of the Hamas attack on Israel
On October 7, 2023, Hamas, calling itself an Islamic "resistance movement," carried out a bloody attack on Israel, which responded with an occupation and bombings of the Gaza Strip. Since then, a war between Israel and Hamas has been ongoing, affecting the oil market.
CNBC noted that oil prices in the United States recorded their third consecutive session of gains following Iran's recent missile attack on Israel. Anxiety in the region is increasing, and with it, the oil price market is decreasingly stable.
In the opinion of Saul Kavonic, an analyst at MST Marquee, a possible attack by Tel Aviv on Kharg Island (26 square kilometres), responsible for 90% of Iran's oil exports. The mentioned island experienced airstrikes during the Iran-Iraq war in the mid-1980s. A direct conflict between Israel and Iran would impact transit through the Strait of Hormuz. Nearly 20% of the world's daily oil production flows through there daily.
In the event of a full-scale war between Iran and Israel, says Fitch Solutions BMI, "Brent crude could reach the $90-$100 (CAD 122-CAD 136) a barrel range if the conflict in the Middle East escalates further."
