US president Donald Trump’s decision to intervene on Israel’s behalf in its war with Iran is likely to see crude oil prices spike when commodities markets open on Sunday night, experts have warned, with potential consequences for the Irish and world economies.
Oil prices have increased by 11 per cent since Israel’s June 13th attack on Iran, but moved sharply up and down last week as investors weighed the potential for the conflict to impact global oil supply.
Mr Trump’s decision to bomb Iranian nuclear sites overnight on Saturday is likely to result in spot crude prices surging in early trading when the market reopens at 11pm on Sunday.
Brent crude, the global benchmark for oil prices, closed at $77 (€67) a barrel on Friday evening.
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While it could take several weeks for higher crude oil prices to feed into petrol and diesel costs in Ireland, prices at the pump have been ticking upwards in recent days as tension ratcheted up in the Middle East.
Saul Kavonic, an energy analyst at MST Marquee, told Bloomberg on Sunday the market’s reaction will largely depend on Iran’s response. “But this could set us on a path toward $100 oil, if Iran responds as they have previously threatened to.
“This US attack could see a conflagration of the conflict to include Iran responding by targeting regional American interests that include Gulf oil infrastructure in places such as Iraq, or harassing passage through the Strait of Hormuz.”
The maritime chokepoint at the mouth of the Gulf is a vital conduit for not just Iranian shipments, but also for those from Saudi Arabia, Iraq, Kuwait and other members of the Organisation of the Petroleum Exporting Countries.
Washington’s intervention in the war and the White House’s messaging have injected fresh uncertainty into an already anxious macroeconomic environment.
Even before Israel’s strikes on June 13th that killed several senior Iranian military commanders, economists warned that the global economy had entered into a period of heightened volatility with clear risks for Ireland.
In its financial stability review earlier this month, the Central Bank of Ireland warned that the structure of the Republic’s economy and its high level of integration with global capital means the effects of “geopolitical and macroeconomic shifts abroad” can be amplified domestically.
“The potential for further fragmentation in global supply chains or tightening in international financial conditions could have material implications for Irish firms and households,” the regulator said. – Additional reporting: Bloomberg
