Analysts say Israeli retaliation could target Iranian oil infrastructure | Real Time Headlines

Oil markets got a rude awakening this week after Iran launched a massive military operation. ballistic missile attack Crude prices briefly rose more than 5% on Tuesday after a period of subdued trading.

For months, traders have largely ignored the risk of supply disruptions in the Middle East. Instead, bearish sentiment swept the market in September as investors grew increasingly worried about a surplus next year due to weak Chinese demand and rising OPEC+ output.

However, as Israel vows, the expanding war in the Middle East has reached a new boiling point “Painful” reaction Attacks on Iran. Prime Minister Benjamin Netanyahu’s government may retaliate against the Islamic Republic’s oil infrastructure, geopolitical and crude market analysts say.

“There’s a lot of complacency about this war,” Helima Croft, head of global commodities strategy at RBC Capital Markets, told CNBC on Tuesday.exchangeshortly after the attack. “We do need to consider the risk to Iranian oil supplies.”

Retired U.S. Army Colonel Jack Jacobs said Israel could also target Iran’s nuclear facilities, but those structures are hardened and difficult to destroy. He said an attack on these facilities could trigger a larger Iranian ballistic missile attack that would be difficult to defend against.

“What’s really on the table now is more likely to be attacks on oil facilities,” Jacobs told CNBC.scream box“Wednesday morning.

Croft said OPEC member Iran’s daily output exceeded 3 million barrels, a five-year high. U.S. intelligence services have in the past highlighted potential risks at Iran’s Khag Island oil terminal, through which 90% of the country’s crude exports pass, according to a report from RBC Capital Markets on Tuesday.

“The next turn in the retaliation spiral is likely to involve oil – through a decline in Iranian oil capabilities or an attack by Iranian proxies on oil and gas shipments in the Persian Gulf,” Piper Sandler analysts told clients in a Wednesday research note. ”

Bob McNally, president of Rapidan Energy, said the impact on the oil market will depend on the damage to Iranian crude exports and how the situation escalates. McNally said if Iran’s oil exports of about 1.8 million barrels per day were halted, prices could rise by at least $5 per barrel.

Iran, in turn, could retaliate by threatening the 13 million barrels per day of crude oil and 5 million barrels of products it produces and flows through the Persian Gulf, McNally said. The analyst said an upgrade of this magnitude could lead to a $10 per barrel increase in oil prices.

“It’s a dangerous time for the oil market right now,” Andy Critchlow, head of news for Europe, the Middle East and Africa at S&P Global Commodity Insights, told CNBC.European street signsWednesday. “When you look at the level of geopolitical risk that exists, it’s difficult for anyone in the market to really judge the direction.

However, Critchlow said OPEC has 5.6 million barrels per day of spare capacity that it can bring back to the market, and Saudi Arabia is eager to get as much oil back to the market as possible.

“I think any disruption to international market supply from Iran can be made up for by OPEC’s spare capacity and the oil currently sitting idle,” the analyst said.

However, McNally said the oil wouldn’t mean much if there was a major disruption in the Persian Gulf. “Spare capacity won’t help as much of it is trapped within the Strait of Hormuz,” the analyst said.