On June 21, Tencent Securities reported that oil prices soared on Thursday because, according to the Global Network and AFP news agency, the US Ministry of Defense confirmed that the Iranian army shot down a US Navy unmanned reconnaissance aircraft on the 20th local time.
Whether a major war will break out in the Middle East or just a limited conflict, "it will have a significant impact on commodity prices and may cause instability outside the Gulf region", Henry Rome, senior analyst of the political risk consulting company EurAsia Group, wrote in an email. "If it is a limited war, it may push the price of crude oil to more than $100 per barrel; if a serious conflict breaks out, it may push the price of crude oil to more than $150."
However, not all industry experts agree with this view.
Iran strikes back at sanctions
As US President Donald Trump announced last year that the US would withdraw from the 2015 Iran nuclear agreement and try to reduce Iran's crude oil exports, the third largest oil producer of OPEC, to zero, the global market has lost more than 1 million barrels per day of supply and the Iranian economy has been paralyzed. Many analysts believe that the recent series of oil tanker attacks in the Persian Gulf are Iranian counterattacks, but Iran denies that they are related to this.
In response to the US sanctions, Iran threatened to abandon its obligations under the agreement and restore uranium enrichment to a higher level. So, if there is a military conflict or even a full-scale war in the Middle East, how much impact will it have on oil prices?
Some experts believe that the impact will not be too great.
"I think it is unrealistic to think that the oil price will reach $100 per barrel," Stephen Brennock, a crude oil analyst at PVM Oil Associates in London, wrote in an email to CNBC. He pointed out that since the United States lifted its exemption from sanctions on several countries importing crude oil from Iran in May, Iran's crude oil exports have decreased by another 500000 barrels/day, but the market "more or less ignored this".
But Brennock also pointed out: "Even so, if any direct conflict breaks out between the United States and Iran, it will further reduce the export volume of this OPEC member country, which may even damage the crude oil exports of other oil producing countries in the Persian Gulf region." Even so, he still expected that the oil price would not rise to three figures, It is believed that the highest point that is most likely to be reached will be between 80 and 90 dollars per barrel.
"Even if there is a direct conflict in the region (which is unlikely) and subsequently leads to supply disruption, the global spare capacity is sufficient, and production in the United States is growing steadily," added Brennock. "This should serve as a buffer against supply disruptions, thus limiting the rise of oil prices and making it difficult for them to rise back to $100 a barrel“
It is worth noting that although geopolitical tensions triggered the prediction that oil prices would rise, the price of Brent crude oil is still far below the high point last year. The price of Brent crude oil futures in the North Sea for August delivery on ICE Europe Futures Exchange in London also rose by 2.63 dollars, or 4.3%, to close at 64.45 dollars per barrel, the highest closing price since May 31, and the largest one-day increase since January 9. However, it is still far from the four-year high of more than 80 dollars per barrel last autumn.
Oil price may not rise continuously
Other market participants believe that market supply may be severely tightened, which will drive the oil price to soar sharply, but they doubt whether this situation will continue.
"The oil price once reached $100 per barrel, so if there is a conflict, the oil price may rise sharply." said Michael Rubin, an expert on Arab affairs at the American Enterprise Institute in Washington, D.C.
He pointed out that to a large extent, it depends on whether other countries can make up for the gap caused by the decline of Iran's crude oil supply. If the conflict results in the forced closure of the Strait of Hormuz, it will be difficult for crude oil from Saudi Arabia, OPEC's largest oil producer, and Iraq, OPEC's second largest oil producer, to enter the market.
However, "the soaring trend of oil prices will not last long," Rubin said. "Especially, once the oil price rises to $60 per barrel, the shale oil production in the United States will become very economical“
The market is rather complacent
Hlima Croft, head of global commodity strategy at RBC Capital Markets, said that everything depends on whether key energy infrastructure will be significantly damaged. In an email sent to CNBC, she wrote that if a facility like Saudi Arabia's Abqaiq (the world's largest crude oil processing facility) is severely hit, then the oil price will soar.
In addition, if an oil tanker is attacked, it will also stimulate a sharp rise in oil prices.
But Croft also pointed out that the current market "has a rather complacent attitude towards (supply) risks". For now, the market does not seem to be worried about war in the Middle East. "I think people are waiting to see if the energy supply in the Middle East will really be destroyed," he said. Nebula