How would a war between Iran and Israel affect the

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The conflict between Israel and Iran could escalate and if this grim scenario becomes a reality, the crude oil price will not be unaffected. While a war between these two countries is not imminent, the recent warnings reiterated by Israel’s Prime Minister and the adamant attitude of Iranian officials keep this issue actual.

There are several ways in which action could unfold and the real question is not whether the price of crude oil will go up, but rather how quickly the costs will rise.

Guest post by Martin K. of http://www.binaryoptionsthatsuck.com

Don’t be overconfident in excess capacity

Crude oil prices are as high as $94 per barrel and with the conflict between Iran and Israel continuing, it is very likely that this trend will continue. Even if the war doesn’t begin, the existing tensions with cause the price to inch closer to the $100 mark, but things could turn from bad to worse if Israel launches a preemptive strike. Everyone hopes that if Iran’s exports are affected, Saudi Arabia and other OPEC members will boost output and compensate the shortfall in supplies.

This is merely wishful thinking, because the excess capacity has been almost exhausted and not even Saudi Arabia will be able to produce more than an additional 1.5 million barrels per day. Add to this the fact that this country relies on the Strait of Hormuz to export oil and it becomes clear that we have another reason to expect prices to go up. Unless the United States succeeds in keeping the strait open and safe, crude oil prices will soar and seemingly incredible values of $200 per barrel are possible.

The International Energy Agency’s contribution

With the excess capacity being unreliable, consumers shouldn’t assume that the International Energy Agency will be capable of offsetting the loss. Its 1.5 billion barrels will be released gradually to prevent the crude oil prices from soaring, but this is rather a short-term solution. The prices will still climb as high as $150 per barrel, and will gradually fall after the conflict is over but it is reasonable to expect backend buying. This means that replenishing the stock will ultimately trigger another increase in the price, but the amounts will depend on the conflict’s duration and effects.

One of the few scenarios in which the crude oil price will revolve around of value slightly higher than $100 after the conflict ends, is the one involving a significant disruption in Iranian exports. Neither Saudi Arabia nor IEA will be capable of offsetting this loss and if the conflict lasts long enough, the global economy will slow down. After the war ends the demand will be lower and as a result the prices will not jump as high, but this is hardly a desirable outcome.

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20 Comments

  1. If Israel will go to war , oil price will go up, simple. I think the best for everyone that they will not go to war.

    • I must say, you’re quite the deep thinker. Let’s apply your kind of logic to another situation. “If you eat, you will create human waste, simple. I think the best for everyone that you will not eat.”

  2. Israel should attack Iran if it has to, and not think about oil price. The world didn’t think about Israel right to exist and didn’t launch embargo on Iran several years ago. Israel stands before existential threat and hers duty is to tackle the Iranian problem. Israel existence is much important to Israel than the oil price to Europe and America, sure less important than for the European and Americans themselves. If the US had choose to ignore Iran threat until now it’s their problem.

    • widmerpool on

      why is acceptable for Israel to have 200 nuclear devices while Iran cant have 1 ? when israel decommisions theirs then they can lectuer Iran.

      • “If the Arabs (Muslims) put down their weapons today there would be no more violence. If the Israelis put down their weapons today there would be no more Israel.” (Shira Sorko-Ram, Maoz Israel newsletter May 2004.) But given all of your comments, I suppose you already realize that.
        (P.S. The word is “lecture”, not “lectuer”.)

      • Tzvi Tamari on

        And exactly how do you have this information? Perhaps you have personally seen and counted them! LOL

  3. Mr. Wilson on

    Israel can bump right off – about time too!

    It’s just a tragedy that it’ll take Iran (another bunch of crazy munters) to do it – should have been done long ago.

    It’ll be their just desserts coming home to roost.

    • Israel is the only democracy in the Middle East and has produced unlimited technical achievements used by all of mankind.

      It seems that you are just another Anti-Semite who cannot bear the thought of the existence of a vibrant Jewish State….

      • widmerpool on

        doubtless Israel has done some good things but remember Hitler gave us the VW. he had slave labor, Israel has the Palestinians.

        • Please spare us your juvenile ignorance and insults. Save it for open mike night in Ramallah or Teheran. (By the way, Mr. Widmer Pool — do you have a brother named Cess?)

    • You should move to Iran and then when we carefully and effectively cancel the ability to create nuclear weapons while minimizing human loss, you’ll appreciate Jewish values as opposed to islamic extremism.

      • The Palestinians already appreciate a lot the Jewish values. More of them, anyone?

        • Yes, actually, many Palestinians know that they are much better off living in Israel than they would be under any Arab-ruled or Muslim-ruled state. Do some research if you think you can handle this truth.

  4. It makes economic sense to allow Iran have their (Russian) nuclear energy or weapons. The world cannot afford to disarm Iran. Too costly.

    Russia is the largest petroleum producer not Saudi Arabia. If oil prices go up due to war in Strait of Hormuz, Russia will be VERY happy. Europe will pay ANYTHING in coming winter! And that means, USA cannot have its way in Strait of Hormuz without being confronted.

    Russians will demand the creation of Palestine nation if they were to back down.

    Iran-Israel war will end with the creation of Palestine (more trouble).

  5. You want a different result? Then do something different. The geo-politics will change only when the people change. Rhetoric, bullets and bombs have been hurled at each other for over 50 years. No solution in sight. Third-party countries, ‘welwishers’, have become richer selling weapons, trading in oil and collecting interest on loans.

    The parties to the conflict have to come to the table, without any preconditions. Navigate through the minefield that is called bilateral relations. That is the only way forward. Anything else is only boring repetition.

  6. Tzvi Tamari on

    The only way forward is for Israel declare its sovereignty over Judea and Samaria. Those Arabs(are not Palestinians) who wish to can move to any of the Arab or Muslim countries

  7. If America continues to side with the UN and not stand with Israel concerning post 1967 borders, we will see Jerusalem cut in half causing the full vent of the God of Moses to fall on the United States, starting with the New Madrid and West Coast megga quakes! The future of America and Canada hangs in the balances. It is time that every true believer in Yeshua stand against America’s intervention in the Middle East that will altimately drag in the UN to fight in a battle that will set the stage for the man of sin to come on the scene to defuse the situation. All nations who threatens the peace of Israel will find themselves cut to pieces in the days ahead. America needs to repent of her resolve to back the UN to keep Jerusalem from being divided.

  8. Mike Hansen on

    Why do I have here about Israel in every news and every paper and everything. Can the Jewish people find another place so that the rest of mankind can live in peace.