Oil is in the crosshairs as the prospect of confrontation brews between the U.S. and Iran. At least, that’s how Iranian officials would have it. A top military aide to Iran’s supreme leader Ayatollah Ali Khamenei, Yahya Rahim Safavi, warned over the weekend that “The first bullet fired in the Persian Gulf will push oil prices above $100.” He added, “This would be unbearable to America, Europe and the U.S. allies like Japan and South Korea.”
More than a million barrels of oil per day have been wiped off the market as U.S. sanctions, imposed after the Donald Trump administration withdrew from the 2015 Iran nuclear deal last year, endeavor to bring the exports of OPEC’s third-largest producer to zero. This has contributed to the crippling of Iran’s economy, which the U.S. administration says will continue unless Iran “acts like a normal country” and ceases its support of terrorist proxies in the region and ballistic missile testing.
In an area responsible for the shipment of one-third of the world’s seaborne oil, just how high could military confrontation — or indeed, an outright war — send the price of crude? Not as high as you might think, according to some experts.“I think that $100 per barrel is ambitious,” Stephen Brennock, an oil analyst at PVM Oil Associates in London, told CNBC via email on Tuesday. He pointed out that the oil market has “more or less shrugged off” the disappearance of a further 500,000 barrels per day of Iranian oil since Washington terminated its sanctions waivers in May.