Iran appears to have strengthened ties with its Persian Gulf neighbors over the last year, diminishing the chance that it would pursue a broader regional conflict. But if that analysis proves wrong and Iran strikes refineries in the region or disrupts shipping, the world could be in for a considerable shock.
Did Saudi Arabia release oil from its reserves?
Oil prices surged by a fifth, but then quickly dropped as Saudi Arabia released stocks from its reserves. ¡°We have precedent for that kind of supply shock,¡± said Eli Berman, an economist at the University of California, San Diego, and a research director at the University of California Institute on Conflict and Cooperation.
Could Iran threaten oil shipments through the Strait of Hormuz?
The Trump administration subsequently pinned the blame on Iranian forces. As it has done before, Iran might also threaten the passage of tankers through the Strait of Hormuz, the critical waterway that is the conduit for oil produced in the Persian Gulf, the source of nearly one-third of the world¡¯s oil production.
Will a Middle East conflict jeopardize the world’s access to oil?
Every conflict in the Middle East holds the potential to jeopardize the world¡¯s access to oil. This one appears no different. Last Thursday, after President Biden said his administration was ¡°discussing¡± the possibility of supporting an Israeli strike on Iran¡¯s oil facilities, oil prices spiked by more than 4 percent.