Oil and gas prices go up after Israeli attacks on Iran

International oil prices were shot in the air on Friday morning, in response to the Israeli attacks on Iran, and subsequently the Iranian counter -raids. The price of a barrel of Brent oil, the most used oil price in Europe, rose by no less than 10 percent in a short time, to more than 77 dollars. The price of WTI oil, the most used oil price in the United States, rose with a corresponding high percentage. They are the best price increases within one day since Russia in 2022 unleashed an energy crisis in Europe.

Fluctuations of oil prices have a large (be the delayed) influence on the prices of numerous products important for consumers and companies. Not only those of petrol, diesel and kerosene, but also those of products in which plastic is processed (from bras to sports shoes to lipstick). Plastic is made of petroleum and it is almost everywhere. Rising oil prices therefore boost inflation.

The unrest stems from worries in oil traders about a possible disruption of global oil markets as a result of a further escalating conflict between Israel and Iran. Not only is Iran himself one of the largest oil producers in the world, and could attack oil installations in the country (despite all the sanctions that the country is buried by, Iran still knows how to export a considerable part of its oil, especially to China). The country also borders the Strait of Hormuz, a Zeestraat along which around 20-25 percent of all oil is transported in the world. Some oil traders fear possible counterattacks of Iran on oil infrastructure and oil ships in the Strait of Hormuz in an expanding conflict, or even an outright blockade.

Buy alternative oil

There are no concrete disturbances yet. If Iran’s own export would come to a halt, it would in the first instance find China. Iran sells almost all of its oil to China. But other countries, also in the West, can then also be hit. If China tries to buy alternative oil, there is more competition for the scarce remaining oil and the prices rise, also in Europe and the US (although the latter has largely become self -sufficient since fifteen years ago on a large scale of shale oil in their own country). Europe imports the lion’s share of its oil, including from other Middle Eastern countries. If those currents are disturbed, for example due to a blockade of Iran, Europe has an extra problem.

Even countries that have their own oil can therefore be hit due to rising prices. In the US, US President Trump has always said that he wants oil prices to fall in his country. In that respect he has no interest in a further conflict.

Iran also has an interest in not (seriously) disturbing the oil vessel in the Strait of Hormuz. Almost all of its oil is transported via Die Zeestraat, including those to China, his most important customer. The income from that trade with China accounts for half of Iran’s government budget, and together account for 6 percent of GDP. If Iran would raise a blockade, it also risks a conflict with the US. Saudi Arabia, the third largest oil producer in the world, also has alternative export routes, via its own pipeline that runs to the Persian Gulf, where it can still export with tankers.

The oil prices have now calmed down something. Brent and WTI were both ‘only’ 5 percent higher around ten in the morning. Traders seem to want to wait and see how the conflict goes further. Incidentally, it is teeming with speculators on the oil markets, which means that price fluctuations are often considerably strengthened. International gas prices also rose Friday morning. A lot of gas also comes from the Middle East and is transported through the Strait of Hormuz.

To share





Mail the editors