A dramatic escalation of the current Israel-Iran standoff could plunge the world into a “disastrous energy crisis,” Dr. Mamdouh G. Salameh, an international oil economist and a global energy expert, told Sputnik.
Oil prices could soar as high as $120 a barrel, he added. The situation is extremely volatile, and could change “depending on Iran’s response to the attack on its Embassy in Damascus,” noted the pundit.
The current upswing in the Brent Crude Oil price is due, first and foremost, to “solid market fundamentals, robust global oil demand, a tightening market, Chinese crude oil imports breaking last year’s records and rising by 9 percent higher in the first quarter of 2024 over the same quarter in 2023,” noted the expert.
Dr. Salameh went on say that while the same fundamentals had held true since January 2022, it was "deliberate manipulation" of the market by the United States involving the International Energy Agency (IEA), oil traders and speculators that had kept prices subdued “for the benefit of the US economy.”
But amid currently escalating tensions, “bullish market sentiments are prevailing over market manipulation.
Initially, the geopolitical tensions triggered by the latest spiral of the Palestine-Israel conflict failed to have a noticeable impact on oil prices, recalled the expert.
“The reason is that Iran announced from the start of the war that it has no plans to get involved and widen the war,” he underscored.
However, in the wake of the recent Israeli missile strike on the Iranian Consulate in Damascus, Tehran could retaliate in a manner that would possibly widen the war, claimed the economist.The energy expert warned that if Iran were to retaliate, it could lead to a domino effect, prompting both Israel and the US to use it as a pretext for attacking Iran's nuclear facilities.
“In this case, Iran will definitely try to block the extremely important Strait of Hormuz by mining it, thus disrupting the shipment of an estimated 20 million barrels a day (mbd) and a big volume of Qatari LNG exports, and plunging the world in a disastrous energy crisis. This could cause oil prices to rocket, with Brent Crude hitting 110–120 dollars a barrel,” Dr. Salameh said.
The analyst believes that if such a scenario were to occur, the surge in oil prices would have a direct impact on global economic growth, affecting virtually all countries around the world.
“The EU will be particularly hit, especially that its economy is projected to grow this year by an anemic 0.6 percent… However, major oil exporters like Russia, Venezuela, Norway and Brazil whose exports don’t pass the Strait of Hormuz will benefit handsomely from the price rise. The global economy could respond by cutting global demand but to no avail since the disruption of shipments through the Strait of Hormuz will create big shortages in the market,” concluded Dr. Salameh.
A possible wider regional conflict between Iran and Israel “can have implications for global growth as it would impact oil and commodity pieces. These would in turn slow down the consumption and keep interest rates elevated,” agreed Suranjali Tandon, Assistant Professor at the Delhi-based National Institute of Public Finance and Policy.
Since Iran is a significant player in the oil market, any conflict would mean that the price of oil will rise, the expert told Sputnik. She added that the uncertainty could lead to an increase in demand for gold.
“We would see a firming up of gold prices as well,” Tandon said.