Iran’s tactic in the Middle East conflict has been to weaponise oil and gas. And, judging from the spike in energy prices, this has not been unsuccessful. But this tactic will need to be prolonged to have an impact on the US-Israeli side.
In contrast to its de-escalatory stance last year, Tehran has attempted to widen the conflict, drawing in multiple countries while attacking energy infrastructure in the region. The strategy reflects two things: its inferior position militarily and Trump’s sensitivity to higher gasoline prices.
A key plank of Iran’s defence appears to involve disrupting tanker traffic through the Strait of Hormuz. Several tankers have already come under attack. Ship owners have paused transits in response, while there are reports that some maritime insurers are withdrawing coverage or issuing cancellation notices for vessels operating in the Gulf.
“Any effective closure of this key chokepoint (whether due to Iran’s actions or shippers avoiding this waterway due to geopolitical risk) will translate into elevated oil prices and a spike in US gasoline prices ahead of the US midterms in November and run counter to Donald Trump’s consistent focus on lower oil price,” Philip Lambert, head of Lambert Energy Advisory, wrote in a blog
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“Moreover, the US electorate would put huge pressure on Trump to cease the Iran campaign if gasoline prices rise and the US economy is threatened by the recessionary tendencies of oil and gas price spikes,” he says.
Lambert says Trump’s signal that the US military campaign in Iran would last “four weeks or so” was effectively a message for the global oil markets to stay calm.
He also notes that the situation for gas markets is more precarious, as “we are still in the winter heating season in the northern Hemisphere when the gas supply system operates at full capacity without much spare volumes”.
This doesn’t bode well for Ireland, which has an out-sized reliance on imported natural gas, meaning households here could soon be feeling the pinch from a second global energy price shock in four years.
