Iranian oil production at risk, could trigger significant price spike

New York: The global oil market is on edge as tensions between Israel and Iran continue to escalate. Goldman Sachs has warned that a disruption in Iran's oil production could lead to a 20 dollars per barrel surge in oil prices.

Concerns have risen following Israel's ballistic missile attack on Iran this week. There are fears that Israel may target Iran's oil industry in retaliation, potentially leading to a significant decline in Iranian oil exports.

As per reports, Daan Struyven, Goldman Sachs' co-head of global commodities research stated  that a sustained 1 million barrel per day drop in Iranian production could result in a peak price increase of around 20 dollars per barrel next year. This estimate assumes that OPEC+ does not increase production to offset the loss.

However, if key OPEC+ members like Saudi Arabia and the UAE step in to compensate for the production shortfall, the price increase could be more moderate, potentially reaching slightly less than 10 dollars per barrel.

Iran is a major player in the global oil market, producing approximately four million barrels of oil per day. Its oil infrastructure, particularly the Kharg Island which handles 90 percent  of crude exports, is seen as a potential target for Israel.

A disruption in Iranian oil exports could have a significant impact on the global oil supply. The Strait of Hormuz, a crucial waterway for oil transportation, could face disruptions if Iran's oil sector is targeted. Iran has previously threatened to disrupt oil flows through the Strait in response to attacks on its oil infrastructure.
Analysts warn that a full-scale war between Israel and Iran could lead to a dramatic increase in oil prices, potentially reaching 100 dollars per barrel or more. While the probability of a full-scale war remains relatively low, the risks of a misstep by either side have increased.

The global oil market is closely monitoring the situation and preparing for potential disruptions. The concentration of spare oil capacity in the Middle East, particularly in the Gulf states, raises concerns about the ability of OPEC+ to fully offset a significant decline in Iranian production.

Source-PTI