Oil prices rose Wednesday to over $70 a barrel amid reports of a potential U.S. Strike on Iran, though analysts suggest the market isn’t fully pricing in a major disruption to supply.
On Wednesday evening, the price of oil climbed above $70 a barrel following reports of a possible U.S. Strike on Iran.
Axios reported that the U.S. May be days or weeks away from attacking Iran. Iran warned Tuesday of a military exercise inStrait of HormuzStrait of HormuzA narrow waterway between Oman and Iran that is one of the world’s most important routes for oil transport., and stated it would “defend itself and respond like never before” if former President Trump follows through on threats to attack the country, according to Bloomberg.
Nadia Martin Wiggen of Svelland Capital outlined several scenarios related to a potential attack on Iran and the resulting impact on oil prices. The geopolitical tensions add to existing market uncertainties, potentially influencing investment decisions.
Nadia Martin Wiggen
Director at Svelland Capital
1. Targeted Strike
She pointed to Trump’s strike on Venezuela earlier this year, noting the administration preferred a targeted strike over a full-scale war.
“If that is the situation, I believe the market would expect oil prices to increase by around $5 as a result of actual strikes on Iran,” Wiggen said.
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2. Removing Iran’s Leader
Another scenario she highlighted is if Trump were to remove Ayatollah Ali Khamenei and the fresh leader lacked popular support, the market would begin to anticipate a prolonged conflict.
“The uncertainty would cause oil prices to rise much more,” she said.
3. Maritime Blockades
Wiggen noted that Iran has prepared for potential conflict by moving more of its oil to ships at sea. The question then becomes what happens if the U.S. Imposes maritime blockades on Iranian vessels.
“In that case, we’re talking about around 1.5 to 1.6 million barrels of oil per day that could be at risk of not being delivered,” she said.
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4. Attacks on Oil Fields or Refining
If the U.S. Were to attack oil fields or refining infrastructure in the country, it could lead to significantly higher oil prices, Wiggen said.
