The war in Iran led to a rise in oil prices. Trump will decide how far they go

Oil prices rose on Monday after US and Israeli attacks on Iran At the end of this week, some analysts expect it could soon reach more than $100 a barrel. Amidst the escalation of attacks on oil and gas infrastructure in the region and the halt of traffic in A Critical shipping routeHow the White House manages the conflict over the next week — as well as the responses of Iran and other oil producers — will be key in determining how high prices ultimately rise, experts tell WIRED.

Brent crude price jump to nearly $80 a barrel — an increase of about 13 percent from Friday’s prices — when markets opened Sunday evening. The market has been calculating the risks of an aggressive U.S. stance toward Iran for months, protecting prices from a sharper jump, says Tyson Slocum, director of the energy program at the progressive think tank Public Citizen. But the disorganized follow-up by the United States until the initial attack—which led to the killing of Ayatollah Ali Khamenei, Iran’s supreme leader—raises greater uncertainty.

“Even though Trump said, ‘Hey, you know, we took out Khamenei, and we knew exactly where he was,’ we clearly didn’t do the same for Iran’s offensive capabilities,” Slocum says. “It seemed like our plan was to eliminate Khamenei and then hope for the best.”

Iran controls Strait of HormuzOne of the most important shipping methods in the world. One out of every five barrels of oil passes through the strait. Key members of the Organization of the Petroleum Exporting Countries (OPEC), the world’s largest oil and gas organization, rely almost entirely on the strait to get their products out of the region.

“For as long as I’ve been in the oil market, Iran and the closure of the Strait of Hormuz has been the ultimate risk scenario for prices,” says Rory Johnston, a Canadian oil market researcher. He says that OPEC usually responds to any international oil crisis by increasing production. “But if OPEC’s emergency production is on the other side of the problem area, it won’t be of much use.” Johnston compares the area to a garden hose, where a kinked part can reduce production.

Throughout the weekend, while Iranian officials sent conflicting messages about whether the strait was officially closed, traffic through the strait fell to near zero. Insurance companies have Raised policies On ships passing through the strait, while some ships were hit by drones. Johnston says what appears to be happening is more of a “voluntary shutdown” than an official shutdown.

There are worse scenarios that could unfold in the coming days for oil prices than simply closing the strait. In September 2019, drones struck major oil production facilities east of the Saudi capital, Riyadh. While the Houthi rebel movement in Yemen publicly claimed responsibility for the attack, American officials announced Iran accused. Attack temporarily They shot up oil prices 15 percent.

On Monday, Saudi officials He said They announced they had shut down a major local refinery following drone attacks, while a few other oil and gas fields across the region were also shut down. Qatar LNG, the state-run LNG producer, said on Monday it was Production shut down Due to drone strikes, which led to a rise in gas prices in Europe. Johnston says sustained serious strikes like this can have a huge impact on prices.

“Going back to the garden hose… (it would be) like taking a gun and blowing up the faucet,” Johnston says.

Clayton Siegel, a senior fellow at the Center for Strategic and International Studies, a think tank based in Washington, DC, agrees. “The more desperate Iran becomes, the more likely it is to use energy as a means to advance its interests,” he says. “If tankers abandon Gulf trade in large numbers, and certainly if key oil infrastructure is damaged, we are likely to see triple-digit crude oil prices again.”