Amid the conflict between Israel and Iran, oil prices have been surging, and after President Donald Trump announced on Saturday the U.S. would be joining the attack on Iran’s nuclear sites, concern has been raised over what this means for gas prices in America.
The U.S. dropped bombs on Iran’s three main nuclear sites on Saturday night—Fordow, Natanz and Isfahan—escalating fears of an expansion of the Middle Eastern conflict that could throw the oil market into turmoil.
With much of the West already seeing spikes in costs, further increases could be looming as the conflict continues.
Why It Matters
After the U.S. attack, the Iran’s reaction will reveal whether the conflict could develop into a major regional or even international conflict.
Iran may retaliate against U.S. forces in the region, cut off a global oil supply route or try to accelerate its nuclear program. Although, Trump has warned of further military action if Tehran does not now decide to make peace.
What To Know
In the past week, Brent Crude oil stocks have already jumped 11 percent since Israel attacked Iran and is expected to continue rising on Monday, according to Emirati newspaper Gulf News, although prices have been fluctuating.
The oil market had stabilized on Friday, according to Reuters, after the U.S. imposed new Iran-related sanctions, which fueled hopes that a negotiated agreement could be made between the two countries.
That relief in the market was only temporary as after Iran threatened to close the Strait of Hormuz, the world’s most important oil chokepoint, in response to the U.S. strikes.
Fears that Iran could attack U.S. oil infrastructure in the region, and levy its power over the Straits of Hormuz could “combine to make prices and speculation rise about the security and dependability of supply,” Greg Kennedy, director of the Economic Conflict and Competition Research Group at King’s College London told Newsweek.
“Lack of clarity of how long this condition will last will also lead to hoarding or preemptive purchasing by other nations, so there are competition supply fears that will drive up prices,” he added.
Reflecting on the knock-on effect this would have on U.S. gas prices, Kennedy said that in the long term, the conflict “will most certainly see energy prices go up at the pumps.”
“This is not an act that just stays in the Gulf region, it has wider global strategic ripples,” he said.
Kennedy said that higher oil prices could also mean that Russia is able to gain more money—oil from the Urals region has already increased by 26 percent in the past month. “This is making war in Ukraine last longer now as well as it gives [President Vladimir] Putin both political and economic ammunition to continue his war efforts and avoid the need for peace talks.”
What People Are Saying
Greg Kennedy, director of the Economic Conflict and Competition Research Group at King’s College London told Newsweek: “The overall impact of actions that make the world look even less safe than it was previously was is always a cost to the civilian sector and society as a whole.”
What Happens Next
As the conflict, and its repercussions, continue to unfold in the next few days, it will become more clear how significant the prices hikes will be.
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