Israeli strikes on Iran cause oil prices to skyrocket

Last night, a major Israeli attack targeted Iran's nuclear program. Tehran immediately retaliated with a drone attack. The escalating tensions in the Middle East are raising fears of disruption to global energy supplies.

Last night, Israel struck several sites linked to Iran's nuclear program and killed five leading figures—two scientists and three of the country's most senior military officials, including General Hossein Salami, commander-in-chief of the Revolutionary Guards. The air strike was reportedly followed by targeted operations carried out by infiltrated teams. In response, Tehran launched a first wave of 100 drones against Israel.

Oil prices immediately skyrocketed. Brent crude prices jumped by up to 11%, the sharpest increase in three years.

This move is a complete reversal of the oil market trend. Prices have been falling sharply since the beginning of the year. On the one hand, investors feared a slowdown in demand caused by the trade war launched by Donald Trump. On the other hand, OPEC+ reopened the taps, with three successive announcements of production increases of 411,000 barrels per day.

Monitoring the Strait of Hormuz

But now, the escalation in the Middle East is raising fears that production and exports from the region could be disrupted. Even though at this stage no oil facilities have been affected in Iran.

Iran currently produces 3.3 million barrels per day. Above all, a third of oil tankers pass through the Strait of Hormuz. If the escalation continues and supplies are disrupted, prices could rise even further.

The same mechanism also applies to gas. Qatar, which produces 20% of the world's LNG, exports it through the Strait of Hormuz.

In the worst-case scenarios being considered by strategists, the price per barrel could reach levels not seen since 2008: JPMorgan is talking about $130, while ING believes that the record high of $150 could be exceeded if the disruptions continue until the end of the year.

The coming days will reveal whether this escalation is set to continue. The Israeli attack comes as talks between the US and Iran have been ongoing for several weeks with a view to reaching a nuclear agreement. A meeting is still scheduled for Sunday in Oman. The United States, through Secretary of State Marco Rubio, has assured that it was not involved in the Israeli strikes.