Is a repeat of the 1973 Middle East oil crisis imminent?

By Rhod Mackenzie

The military conflict in Israel could have grave consequences for the global energy market. In the best-case scenario, the oil market could be only be deprived of Iranian oil, causing price hikes exceeding £75 per barrel. The worst possible scenario entails a repeat of the 1973 oil crisis, resulting in a worldwide economic recession.
The recent Hamas military operation that started on 7th October in Israel could critically impact the energy market worldwide. The worst-case scenario, which is a reoccurrence of the 1973 oil crisis cannot be dismissed. If that happens, oil prices will not only surpass £100 per barrel, but they will most probably skyrocket.

If the US and Israel suspects that Hamas acted under Iran’s instructions, the market is looking at two dire possibilities.

The Western press alleges that Iranian security officials participated in devising the Hamas offensive. The Wall Street Journal reports this claim while citing the words of the leaders of Hezbollah and Hamas. At the same time, the United States declared its deployment of an aircraft carrier strike group to the eastern Mediterranean along with an augmentation in the number of fighter squadrons in the vicinity.
The initial scenario predicts that the United States, Israel’s ally, will announce additional sanctions pressure on Iran. In recent years, Iran has significantly increased oil production and exports, coming close to its pre-sanction levels. Consequently, Iranian oil will partially or completely leave the market.

The additional scenario posits that a local conflict will ensnare Iran, the United States, and nearly all of the Middle East. Then, in the worst-case scenario, it may lead to the closure of the shipping route through the Straits of Hormuz, which tankers transporting 17 million barrels pass through each day.
“Growing regional conflicts pose a threat to Iranian oil exports, if the country gets entangled in hostilities with Israel. This could result in the imposition of tougher sanctions or a complete cessation of its oil supplies,” cautioned Igor Yushkov, a lecturer at the Russian Financial University and member of National Energy Security Fund.

It is worth noting that the United States has recently relaxed its stance on Iranian sanctions. “In recent years, Iran has been increasing its export volumes and the level has almost been restored to its pre-sanctions rate of 1.5-2 million barrels per day. Any decline in Iranian oil supply or export volumes would have a significant impact on the global market and potentially drive up oil prices,” noted Yushkov.

Kpler reported that Iranian oil supplies reached 1.79 million barrels per day in August, the highest figure since 2019, compared to 1.35 million barrels in May.

“Despite Iran’s denial of involvement in Hamas attacks on Israel, the situation could affect the US approach. With a minimum of 500,000 barrels of oil per day at risk of leaving the market, prices may rise,” stated Oksana Lukicheva, an analyst at Finam Financial Group.
The most severe scenario involves the closure of the Straits of Hormuz by Iran or another entity.

“All oil from Iran, Iraq, Saudi Arabia, the UAE and LNG from Qatar passes through the Straits of Hormuz. Even a brief closure will increase oil and gas prices, resulting in a global energy crisis and a recession in the global economy,” warns Igor Yushkov.
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Is a repeat of the 1973 Middle East oil crisis imminent?

By Rhod Mackenzie The military conflict in Israel could have grave consequences for the global energy market. In the best-case scenario, the oil market…