Daniel Yergin, vice chairman of S&P Global, said the global economy is entering an unprecedented “dangerous period” as tensions in the Middle East continue to rise.
Oil markets have suffered minimal disruption since the conflict between Israel and Hamas erupted on October 7 last year, with prices still under pressure due to increased U.S. production and weak demand from China. However, that sentiment has shifted. Oil prices surged last week on concerns that Israel could target Iran’s oil industry in retaliation for Tehran’s ballistic missile attacks, with industry analysts expressing concern about a real threat to supply.
“Israel has not yet determined what actions they will take – that is under discussion,” U.S. President Joe Biden told reporters at a White House press conference last week, adding that he would not encourage Israel to attack Iranian oil facilities.
Last week, both oil benchmarks posted their biggest weekly gains since March 2023. Sri Lanka’s Intermediate crude oil fell 1.83% to $75.77 a barrel.
Yergin told CNBC’s “Squawk Box Asia” that he expected Israel’s retaliation to be not just a repeat of last April but “more intense.”
Iran and Israel clashed in April, but ultimately avoided full-scale war. Iran has fired hundreds of ballistic missiles and drones at Israel in retaliation for attacks on Iranian diplomatic facilities in Syria.
Asked whether the global economy was on the brink of another supply shock due to tensions in the Middle East, Yergin said it was an unstable time for markets.
“I think this is a very dangerous moment, we haven’t experienced anything like this yet,” he said.
Furthermore, while Yergin insists there is no certainty that the Iranians possess operational nuclear weapons, this is still “certainly behind the scenes,” especially from the Israeli perspective.
“The bet is that the Israelis are not going to attack, try to attack, a nuclear facility at this time. But months, weeks from now, whatever it is, Iran will have the ability – people think – to deliver a nuclear weapon.” , which increases the risk,” he said, comparing the moment to the 1962 Cuban missile crisis.
Pavel Molchanov, managing director of investment services firm Raymond James, said Israel was nonetheless more concerned about Iran’s nuclear facilities than about Iran’s oil industry. Iran’s nuclear program has reached a stage where in about a week the country could enrich enough uranium to produce five fissile weapons. According to estimates from IranWatch, a website published by the Wisconsin Nuclear Arms Control Program.
“The worst-case scenario is something Iran can do on its own, which is to block the Strait of Hormuz. So this is not directly related to Israeli air strikes or missiles.
The strait between Oman and Iran is an important passage One-fifth of global oil production daily flows, according to the U.S. Energy Information Administration. It is a strategically important waterway connecting Middle Eastern crude oil producers to major markets around the world.
The inability of oil to cross the strait, even temporarily, would increase shipping costs, cause severe supply delays and push up global energy prices, with some speculating that the worst-case scenario could send oil prices soaring above $100 a barrel.
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