News Middle East21 Jul 2019

Middle East:Impact of war with Iran being assessed

21 Jul 2019

Surging oil and gas prices, skyrocketing insurance costs and attacks on energy and banking infrastructure are likely to follow quickly if Iran's interception last week of two UK-linked tankers spirals into outright war, reported Bloomberg.

Oil and gas prices

Mr Ian Bremmer, president and founder of Eurasia Group, a political risk research and consulting firm, said, “In the case of a full regional conflict, oil will rise past $100 a barrel and could even go to $150.” If there are only limited strikes, oil might reset at around $80.

Mr Ken Medlock, a senior director at Rice University’s Center for Energy Studies in Houston, said that oil could jump to $100 a barrel or higher immediately after a war breaking out, but would likely settle closer to $80 once some resilience of exports from the region is demonstrated. While the rise of US shale might mute the impact a bit, it can’t offset any major disruption in the Middle East.

Mr Ole Sloth Hansen, head of commodity strategy at Saxo Bank, said that crude could spike toward $90 a barrel before eventually collapsing amid the negative impact on global demand. The level it reaches will depend on the ability to maintain safe passage through the Strait of Hormuz.

Insurance

Mr Hansen also said that for shipping companies, insurance costs will skyrocket, or there will be no cover at all, and ship owners with no cover may be reluctant to risk their vessels.

Mr Bremmer also said that there would likely be an increase in Iranian cyber-attacks on energy and banking targets in Saudi Arabia and the UAE.


 

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