‘Maximum economic pain’: Oil prices could skyrocket if Iran-Israel attacks escalates, expert says

Huge smoke rises up from an oil facility facility after it appeared to have been hit by an Israeli strike (AP Photo)

As Iran and Israel trade strikes targeting nuclear facilities and energy sites, an oil expert says crude prices could rally by US$5 a barrel and possibly reach $80.

WTI crude oil futures rose to $71 per barrel on Monday as fears of a full-blown conflict between the two countries heightened while Brent crude oil futures rose to $72.

Andrew Lipow, president of Lipow Oil Associates, says this is the first time oil and gas production facilities have been targeted during the long-standing conflict between Israel and Iran.

“If we look back at what’s going on in the Middle East today, in spite of the hostilities between Iran and Israel that we’ve seen over the years, this is really the first time we’ve seen oil and gas production facilities, as well as refined product depots, actually being targeted and impacted,” said Lipow.

“In fact, Israel had launched missiles against Iran South Pars natural gas field so, we do know that there’s some impacts in that energy space. What the market is now looking at is, will there going to be impacts on oil production facilities as well as oil export facilities that might lead Iran to cause a potential supply disruption by attacking either tankers in the Strait of Hormuz or actually attempting to shut the strait down.”

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Over the weekend, Israeli Prime Minister Benjamin Netanyahu brushed off urgent calls by world leaders to de-escalate, The Associated Press reported. In an interview with Fox News on Sunday, he said regime change in Iran “could certainly be the result” of the conflict.

“Certainly, the people of Iran are really being choked by the regime that is controlling the country. What we don’t know is, if the regime feels so threatened, number one is, what would replace them if the current regime was taken out,” Lipow said.

“But number two is, if they are backed into a corner, would they feel that they have nothing to lose by attacking either their neighbours, their neighbours’ production facilities, or shutting down the Strait in order to inflict maximum economic pain on the consumer through rising oil prices, which would certainly exceed $100 a barrel”.

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The barrage of missiles between the two countries can affect domestic consumers at the pumps. Lipow said gasoline and diesel prices can rise.

“I think that the longer the conflict continues, higher oil prices are in the cards, because we don’t exactly know what type of Iranian retaliation is going to be,” he said.

“Whether it’s continuing Israeli targets or are they going to draw American targets into the mix, as well as attacking shipping. Shipping through the Strait of Hormuz is really a soft target that could significantly impact the world economy as well as politics in the United States, on rising gasoline and diesel prices.”