Dan Yergin, vice chairman of S&P Global, said the global economy is entering an unprecedented "dangerous period" as tensions in the Middle East continue to escalate.
Since the conflict between Israel and Hamas began on October 7 last year, the oil market has been relatively unaffected, with prices under pressure from rising U.S. production and weak demand in Asia. However, that view is changing. Last week, oil prices soared on concerns that Israel could retaliate against Iran's oil industry in response to Tehran's ballistic missile attack, with industry analysts saying there was a real threat to oil supplies.
"Israel has not yet decided how they are going to strike - that's under discussion," U.S. President Joe Biden told media at a White House press briefing last week, adding that he dissuaded Israel from striking Iranian oil facilities.
In an interview, Yergin said he expected Israel’s retaliation would not simply be a repeat of April but would be “much stronger.”
Iran and Israel clashed in April but ultimately avoided all-out war after Iran launched hundreds of ballistic missiles and drones in response to an Israeli attack on Iranian diplomatic facilities in Syria.
Asked whether the global economy was on the brink of another supply shock sparked by tensions in the Middle East, Yergin said it was a critical moment for the market.
"I think this is a very dangerous time, a time that we haven't seen before," he said.
Furthermore, while Yergin insisted that it was not certain that Iran had an operational nuclear weapon, this was “certainly a background factor to be considered,” especially from an Israeli perspective.
“The speculation is that Israel will not attack, or attempt to attack, Iranian nuclear facilities at this point,” he said. “But a few months or weeks from now, whenever that is, people think Iran will be able to launch a nuclear weapon, and that raises the stakes,” he said, comparing the moment to the Cuban Missile Crisis of 1962.
Pavel Molchanov, managing director of Raymond James Investment Services, said Israel is far more concerned about Iran's nuclear facilities than Iran's oil industry. Iran Watch, a subsidiary of the Wisconsin Project on Nuclear Arms Control, estimates that Iran's nuclear program has advanced to the point where it could enrich uranium enough to make five fission weapons in about a week.
"The worst-case scenario is that Iran could do something on its own, which is to close the Strait of Hormuz. So this is not directly related to Israeli air strikes or missiles," he said.
The Strait of Hormuz, located between Oman and Iran, is a vital passage through which about one-fifth of global oil exports pass every day, according to the U.S. Energy Information Administration. It is a strategic passage connecting Middle Eastern oil producers with major markets around the world.
The inability of oil to pass through the Strait of Hormuz, even temporarily, would increase shipping costs, cause massive supply delays and push up global energy prices. Some analysts predict a worst-case scenario could send oil prices soaring above $100 a barrel.
The article is forwarded from: Jinshi Data