Israel’s massive attack on Iran has caused a significant increase in oil prices, which are up as much as 15%. Many analysts believe if this leads to a wider war that includes other nations in the Middle East, crude could move toward $100 a barrel, as it did when Russia invaded Ukraine in February 2022. At the start of that conflict, oil reached $110.
Israeli Prime Minister Benjamin Netanyahu said, “We targeted Iran’s leading nuclear scientists working on the Iranian bomb. We also struck at the heart of Iran’s ballistic missile program.” Iran has early nuclear capability but not a fully functional nuclear weapon. Negotiations to stop the friction between Iran and Israel have been slow.
Netanyahu said the attack could go on for days, and Iran will certainly retaliate.
Iran produces almost 4% of the world’s crude. Neighbor Iraq produces 8%. The Middle East, in total, produces well over a third of the world’s crude. It is too early to say if other Middle East nations will be drawn into the conflict.
Crude oil rose to $72 a barrel this morning, after trading closer to $60 in the past month. This low price is due largely to rising production by OPEC+ and a slowing of the Chinese economy. It is the world’s largest importer of crude.
Crude oil prices have been a key factor in keeping inflation low in the United States and Europe. In the U.S., it has kept gasoline prices slightly above $3 for an average gallon of regular nationwide. High gas prices typically reduce household incomes enough to impact consumer confidence and spending. These are key to gross domestic product.
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