Israel is considering strikes on Iran’s energy sector, a retaliatory option that has rattled markets and raised concerns that war in the Middle East could threaten global oil supplies.
Any Israeli attack that disrupted Tehran’s 1.7mn barrels per day of oil exports would have ramifications for global energy markets — while any Iranian retaliation targeting rival oil exporters in the Middle East would cause even more upheaval.
Such an uncontrolled cycle of attacks would risk a price surge in the world’s most essential commodity, reigniting inflation and hurting the global economy weeks before the US election, analysts said. But they said there were mitigating factors pointing to some underlying resilience in the market.
Will Israel strike Iran’s energy infrastructure?
Israel has been discussing strikes against Iran’s oil and gas industry with its US allies as it considers a potential response to Tehran firing 180 missiles at Israel this week.
When Iran launched a clearly telegraphed missile and drone attack on Israel in April, Prime Minister Benjamin Netanyahu’s government responded with a strike on an Iranian air base. Neither side sought a further escalation.
This time, however, analysts forecast a more aggressive Israeli response, possibly targeting Iran’s key oil and gas industry.
“Israel is in what I call a ‘three eyes for one eye mode’. I have a feeling the response will be much bigger than in April,” said Bob McNally, founder of Rapidan Energy Group and a former energy adviser to US president George W Bush.
Washington is expected to urge Israel to limit its strikes on Iran’s energy infrastructure. But Israel sees the energy sector as the “ATM for the axis of resistance proxies”, said Helima Croft, head of commodity strategy at RBC Capital Markets and a former CIA analyst, referring to the network of Iran-backed militant groups in the region.