National Bank of Canada’s (NBC) Angelo Katsoras outlines how an Iran conflict could severely disrupt Oil and gas markets if key energy infrastructure and the Strait of Hormuz are targeted. He notes that while worst-case scenarios have been narrowly avoided so far, prolonged hostilities raise the risk of miscalculation that could trigger major, long-lasting energy supply shocks.
War scenarios threaten global energy flows
“However severe the damage already inflicted on the energy sector in the Middle East, the worst-case scenario has so far been avoided. What this might entail is a U.S. strike on Kharg Island’s energy infrastructure, through which about 90% of Iran’s oil exports are shipped, and Iran retaliating by littering the Strait of Hormuz with thousands of sea mines. The United States and Israel would respond by bombing energy infrastructure across Iran, and Iran would punch back with attacks on energy infrastructure across the Gulf states.”
“Were this to occur, even if hostilities subsided in short order, it would take months to reopen the strait and years to repair the damage to the infrastructure in the region.”
“In addition to causing a long-lasting shock to oil and gas prices, the disruption would significantly impact several other sectors for which the region and its shipping lanes are critical, including aluminium, agriculture and helium production.”
“The parties to the conflict did come close to the worst-case scenario but pulled back.”
“Bottom line: While the threat of mutually assured energy disruption may be preventing both sides from deliberately crossing key escalation thresholds, many things can still go wrong in the fog of war.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/oil-escalation-risks-from-iran-conflict-nbc-202603301435
