How could the U.S. strikes in Iran affect global oil supply? : NPR

The recent military strikes by the U.S. and Israel against Iran have raised concerns about the impact on global oil markets and the economy. The extent of the effect on oil production and trade remains uncertain at this time.

With trading markets closed, the impact on oil prices will only be known once they reopen late on Sunday. However, concerns about threats to oil supplies and trade have been driving crude prices higher in recent weeks.

Despite facing sanctions, Iran continues to be a significant oil exporter, managing to export approximately 1.9 million barrels per day as of December, according to the International Energy Agency.

Most of Iran’s oil exports are directed towards China and are transported via “shadow ships” that conceal their activities to evade sanctions. The U.S. has been increasing its enforcement on these shadow fleets to restrict their operations.

Antoine Halff, chief analyst at Kayrros, notes that China has substantial reserves which could cushion the impact of any disruption in Iranian oil imports.

Halff emphasizes that the primary concern in oil markets stems from potential retaliation by Iran following the military strikes.

Iran’s control over the vital shipping route of the Strait of Hormuz, through which a significant amount of global oil demand flows, poses immediate risks to global oil prices if disrupted.

Although the world currently has surplus oil supply, prolonged closure of the Strait of Hormuz could lead to a significant impact on oil prices. Past conflicts between Iran and Israel have avoided targeting oil facilities, keeping prices relatively stable.

The worst-case scenario for oil markets involves Iran targeting neighboring producer countries in the Gulf, potentially leading to a major disruption in oil supply and a significant price increase.

Overall, the uncertainty surrounding Iran’s response to the military strikes remains a key concern for the energy market and global economy.