1. An Israeli attack on Iranian oil
A member of OPEC+, Iran is a heavyweight in the global oil market. In the Persian Gulf, Iran comes just behind Saudi Arabia and Iraq in terms of oil production.
Despite US sanctions against it, Tehran exports around 1.7 million barrels per day of crude and refined oil, which corresponds to around 1.6% of global consumption. If Iranian oil is mainly sold in China, at cut-off prices, an attack against it would inevitably raise world prices. “It is also the anticipation of an attack by Israel against Iran which has caused the price of a barrel to rise in recent days.explains Francis Perrin. If Israel were to target Iranian oil, a barrel of Brent would exceed $80. How high could he go? It’s impossible to say.”.
But will Israel risk targeting Iranian oil when it could target military, political or industrial targets? “An attack on Iranian oil would be considered a high-level response and could result in all-out war between Iran and Israelwarns Francis Perrin. Joe Biden doesn’t want it, but the decision will belong to Benjamin Netanyahu’s war cabinet..
Let us also remember that a surge in oil prices would not please Kamala Harris, a few weeks before the American presidential elections. Indeed, the price of a gallon of gasoline, which depends greatly on the evolution of the barrel, is closely monitored by American voters.
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“I believe that Israel will initially refrain from launching major attacks on Iranian oil export facilitiesfor his part, Bob McNally advances. But if the escalation continues, these Iranian facilities could be targeted by Israel..
Among the most important targets in Iran is the island of Kharg, the main export channel for Iranian oil.
guillement“If the Iranian regime believes its survival is at stake, it could attack Gulf infrastructure to try to deter Israel from further attacks.”
2. An Iranian attack on Persian Gulf oil
If Iran represents an oil production of 3.4 million barrels per day (including 1.7 million for export), the Persian Gulf region accounts for around 19 million barrels per day of production, or almost a fifth of global consumption. In short, disrupting the region’s production or export capacities could have a gigantic impact.
“The most pessimistic scenario for the global economy would involve significant damage and prolonged outages to the Gulf’s oil infrastructure”believes Bob McNally.
But is it realistic? “Iran would prefer there to be de-escalationadds the former advisor to George W. Bush. But if the Iranian regime believes its survival is at stake, it could attack Gulf infrastructure to try to deter Israel from carrying out further attacks. Iran did this in September 2019 by striking critical Saudi oil facilities inAbqaïq and Khouraïs”.
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Among the possible Saudi targets, Bob McNally thinks of the crude oil processing plant located in Abqaiq and the export terminal located in Ras Tanura.
Francis Perrin also believes that an attack by Tehran against Saudi oil infrastructure could only take place if Iranian oil is first attacked by Israel. “Oil is the heart of Iran’s economyexplains Francis Perrin. If it is attacked, the regime could say that, lost for lost, we are creating a mess in the region.”. However, we are not there yet.
“Oil is the heart of the Iranian economy. If it is attacked, the regime could say that, lost for lost, we are making a mess of the region”
3. A blockage of the Strait of Hormuz
The Strait of Hormuz is even more important, with approximately 21 million barrels per day passing through it in 2022. This represents approximately 22% of global consumption of petroleum products. Could Iran tackle this to prevent these flows from fueling global economies? “Blocking Hormuz would constitute an act of war and would draw the United States into the conflictreplies Francis Perrin. Tehran would only risk it if the situation was desperate, for example if the survival of the regime was at stake.”.
“It is the blockade of Hormuz that would threaten the most barrels of oilconfirme Bob McNally. But the United States, and its allies, would eventually reopen it. In my opinion, the greatest risk is massive damage to critical oil infrastructure in the Gulf.”
4. An oil embargo is excluded
This scenario, which has already occurred in the past, seems completely excluded today. For what ? “It is essential for producing countries to sell their oiladvance Francis Perrin. Saudi Arabia, Kuwait and the United Arab Emirates will therefore not trigger an oil embargo to support Iran, a non-Arab Shiite country. They didn’t do it for Gaza or Lebanon.”.
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Francis Perrin also recalls that it was not OPEC (Organization of Petroleum Exporting Countries) but OPAEP (Organization of Arab Petroleum Exporting Countries) which established an embargo in 1973. In any case , the times have changed and this seems to be ruled out in 2024.
5. Saudi Arabia compensates for Iran’s loss
Remember that there is currently an abundance of oil in the world. The 22 OPEC+ countries, including Russia and Saudi Arabia, are voluntarily reducing their oil supply, by more than 5 million barrels per day, to support prices.
These barrels could theoretically be put back on the market in the event of an attack on oil infrastructure (in Iran or elsewhere). However, an increase in OPEC+ production quotas could be interpreted as a helping hand to Western countries, which would have suffered from the surge in oil prices without this intervention. The cartel should therefore think carefully before making such a decision.
In addition, the decisions of OPEC +, which includes Iran and Russia, are taken unanimously. However, these two countries will probably not want to come to the aid of the West in the event of a surge in oil prices following an Israeli attack on Iranian infrastructure. Especially since Russia needs expensive oil to finance its war in Ukraine and oil is its primary source of income.
“However, Saudi Arabia could decide unilaterally to put barrels back on the market to compensate for a loss of production in Iran or elsewherespecifies Francis Perrin. Riyadh would then become a potential target of Iran and would have to receive prior protection guarantees from the United States.. Let us also remember that Tehran and Riyadh recently renewed diplomatic relations.
