Oil costs surge following Israel’s strike on Iran
Global oil prices rose sharply after Israel struck Iran, marking a significant acceleration in Middle East tensions, according to the BBC on June 13th.
The benchmark Brent crude oil climbed by more than 10% not too long after the news came out, reaching its highest level since January. As trading opened in Europe, prices settled around 5% above the closing price on June 12th. Brent crude was at $72.80 a barrel, while US-traded Nymex crude reached $73.20, according to Nationwide News Network on June 13th.
The price surge reflects market fears that conflict between Israel and Iran could disrupt oil supplies from the region. Around a fifth of the world’s oil passes through the Strait of Hormuz, a vital waterway bordered by Iran, Oman, and the United Arab Emirates.
Following the Israeli strike, Israeli Defence Forces said Iran had launched roughly 100 drones towards the country.
“It’s an explosive situation, albeit one that could be defused quickly as we saw in April and October last year, when Israel and Iran struck each other directly,” Vandana Hari of Vanda Insights told the BBC. “It could also spiral out into a bigger war that disrupts Mideast oil supply,” Hari added.
In a worst-case scenario, analysts say Iran could attempt to disrupt millions of oil barrels per day by targeting infrastructure or shipping through the Strait of Hormuz.
“What we see now is very initial risk-on reaction. But over the next day or two, the market will need to factor in where this could escalate to,” said Saul Kavonic, MST Financial’s head of energy research.
Global markets also reacted to the developments. Share prices fell across Asia and Europe, with the UK’s FTSE 100 index declining by 0.3%. Safe-haven assets like gold and the Swiss franc saw gains as investors sought more stable ground.
Israel was recently suggested that their oil supply could rely on Azerbaijani exports despite them formally stopping sales in 2024, Middle East Eye via Haaretz reported on June 9th.
Azerbaijan removed oil supplies to Israel after years of steady increases, with official records showing a stop in exports coinciding with the start of the war on Gaza in October 2023. However, Israeli sources claimed sales have continued. They said: “We received a promise from the Azerbaijanis that the strategic relations will continue, including in the energy sector, and we have nothing to worry about.”
BBC, Middle East Eye via Haaretz, Nationwide News Network
Want to chase the pulse of North Africa?
Subscribe to receive our FREE weekly PDF magazine
