Israel’s next steps against Iran and its allies are under intense scrutiny, with experts warning that the global oil market isn’t fully accounting for the risks of escalation.
After Iran launched missiles at Israel in retaliation for Hezbollah leader Hassan Nasrallah’s death in an Israeli airstrike, many speculate that Iran’s oil industry could be the next target.
As a result, Brent crude oil prices rose 8% this past week, closing at $78.05 per barrel on Friday. However, this remains far below the spikes seen in 2022 after Russia’s invasion of Ukraine and following Hamas’ attack on Israel.
Bob McNally, founder of Rapidan Energy Group and former energy adviser to President George W. Bush, explained that the market is in a wait and see mode, not reacting until there’s an actual disruption in supply. He suggested that the market is fatigued by warnings that don’t materialize, and many expect Israel to exercise caution in its response.
Yet, Israel’s recent airstrikes on Houthi targets in Yemen may signal its willingness to act decisively. McNally described Israel’s current stance as three eyes for one eye but noted that initial strikes are likely to target military infrastructure rather than oil facilities.
McNally warned that any attack on Iran’s nuclear or oil infrastructure, such as Kharg Island—handling 90% of Iran’s crude exports—would likely spark a regional conflict, sending oil prices surging above $90 a barrel.
While Tehran has threatened retaliation against Israel’s energy infrastructure, including power plants and refineries, experts view a blockade of the Strait of Hormuz—vital for global oil shipments—as unlikely, since it would harm Iran’s economy as well.