Oil prices have spiked amid fears that the Israel-Iran crisis could spiral into a broader conflict involving the United States.
Brent North Sea Crude and West Texas Intermediate – the two most popular oil benchmarks – rose 4.4 percent and 4.3, respectively, on Tuesday as US President Donald Trump demanded “unconditional surrender” from Tehran.
The benchmarks stood at $76.45 per barrel and $74.84 per barrel, respectively, following the jump.
Oil prices edged up further in early trading on Wednesday, with both benchmarks about 0.5 percent higher as of 03:30 GMT.
US stocks fell on the rising geopolitical tensions overnight, with the benchmark S&P500 and tech-heavy Nasdaq Composite declining 0.84 percent and 0.91 percent, respectively.
Israel has bombed multiple oil and gas facilities in Iran since Friday, including the South Pars gasfield, the Fajr Jam gas plant, the Shahran oil depot and the Shahr Rey oil refinery.
While there has been little disruption to global energy flows so far, the possibility of escalation – including direct US involvement in Israel’s military offensive – has put markets on edge.
On Tuesday, Trump ratcheted up his rhetoric against Iran, adding to fears that his administration could order a military strike against Iran’s uranium enrichment facility at Fordow.
In a thinly veiled threat against Iranian Supreme Leader Ayatollah Ali Khamenei, Trump said in a Truth Social post that the US knew his location but would not have him killed, “at least for now”.
Iran has the world’s third-largest reserves of crude oil and second-largest reserves of gas, though its reach as an energy exporter has been heavily curtailed by US-led sanctions.
The country produced about 3.99 million barrels of crude oil per day in 2023, or 4 percent of global supply, according to the US Energy Information Administration.
Iran also sits on the Strait of Hormuz, which serves as a conduit for 20-30 percent of global oil shipments.
Nearly all of Iran’s oil exports leave via the Kharg Island export terminal, which has so far been spared from Israeli bombing.
“In the context of seeking to destabilize Iran, Israel may choose to strike its oil exports, believing that working to finish off a hostile regime is worth the risk of alienating allies concerned with potential price escalation,” Clayton Seigle, a senior fellow at the Center for Strategic and International Studies in Washington, DC, wrote in an analysis on Monday.
“Israeli strategists are likely well aware that Iran’s oil export capacity is quite vulnerable to disruption.”
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