BAKU, Azerbaijan, June 17. We have been witnessing for five days now that the military conflict between Israel and Iran has entered its most intense and bloody phase so far, economic analyst Ilham Shaban, commenting on the impact of recent events on the global oil market, told Trend.
He pointed out that a curious kettle of fish comes to light when examining how the conflict shakes up the oil markets.
“On Friday, when markets first received news of Israel striking Iran, the price of oil rose to $78.50. Before that, a barrel of oil on the London Commodity Exchange was sold at $69. However, by the close of trading on June 13, the price of Brent crude had settled at $74.23. That was the final price of the last traded batch. In the following days, reciprocal strikes between the two countries continued.
Analysts came to a conclusion that this conflict was no longer limited to single-day or one-off strikes as before. Although the scale of these attacks has not even reached 10 percent of Iran's overall military potential, the two main facts indicate that oil facilities in Iran were targeted. Against this backdrop, a sharp increase in oil prices compared to the end of the working week was expected.
Yet interestingly, as of 11:30 (GMT +4) on June 16, the price of Brent crude on global exchanges was fluctuating around $74.8. It hadn't even reached $75. This indicates that initial emotions have calmed down and the volume of oil being supplied to the market remains sufficient. There is no information about any serious logistical problems or shortages in oil supply. The strikes on Iranian territory were mainly aimed at military and strategic nuclear facilities.
Therefore, there has not yet been a significant rise in the oil market. Various scenarios are being proposed for the future. We often see such scenarios when sanctions are imposed on Iran or when political tension arises in the region. One such scenario is the possible closure of the Strait of Hormuz. However, this has never happened in history. I believe this is not a realistic scenario at all,” Shaban explained.
The analyst also pointed out that talk of oil prices hitting $100, or even $200–300 per barrel, has always been in the air but has yet to come to fruition.
“That’s why we need to be more realistic. One key point deserves attention: if at the beginning of the year, Iran was exporting approximately two million barrels per day of oil and condensate, in May this figure rose to 2.1 million barrels. The total daily production is about 4.5 million barrels. This means roughly 45 percent of the oil produced is exported. More than half of Iranian oil is purchased by China. Currently, China imports about 1.1 million barrels of crude oil per day from Iran. These are very large numbers.
Imagine, Iran earns over $100 million daily from crude oil exports. On an annual basis, this amounts to nearly $40 billion. That’s why Iran's economic capacity is quite large. The oil sector is the backbone of its economy and the primary financial source for maintaining its military power,” he added.
Weighing in on the matter, another economic analyst, Eldaniz Amirov, pointed out that economic threats are on the rise with the Iran–Israel war heating up.
“The Israel-Iran military confrontation has had a significant impact on the oil market. Brent crude prices rose more than 10 percent over several days, initially reaching $75.15 and later $76.94. Futures prices for crude oil also saw an increase of up to 13 percent. The U.S. VIX index reached its highest level in three weeks. Investors are fleeing risk, exiting stocks, and turning to safer assets like gold and government bonds.
The growing tension around the Strait of Hormuz is adding further risks to the energy market. Currently, 18–20 million barrels of oil pass through this strait daily, accounting for approximately 20 percent of global oil trade. Iran’s threat to close the Strait of Hormuz could lead to even sharper oil price spikes. According to IMF estimates, a 10 percent rise in oil prices increases inflation by about 0.4 percentage points in developed countries.
Meanwhile, the gas market is also at risk. All LNG exports from Qatar and the UAE pass through the Strait of Hormuz. This route accounts for about 1/5 of global LNG trade. If this supply route through Iran is blocked, China and India will be forced to turn to alternative energy sources. This will cause price increases in other markets as well. Even under sanctions, China still meets a significant portion of its oil needs through Iran,” he said.
According to the analyst, the aviation sector is also flying through a stormy patch.
“Iran, Israel, Iraq, and Jordan have closed their airspace. Several international airlines have suspended flights to the region. Empty planes are being diverted from Tel Aviv to Cyprus and European cities. These route changes increase travel times, fuel costs, and insurance risks. This leads to price hikes in both logistics services and tourism. Trade routes and corridors are also under threat. The Strait of Hormuz is a critical passage not only for energy but also for container cargo, including household appliances and consumer goods.
The conflict raises insurance premiums, and delays and shipping costs eventually affect consumer prices. The situation within Israel is also tense, with signs of panic increasing. The shekel has lost two percent of its value against the dollar. Supermarkets are crowded. Reports say shopping activity has surged by 300 percent in many retail chains, and shelves of some products are empty. Barclays, the UK’s largest bank, and EY-Parthenon have called this conflict a ‘scenario that could lead to a global recession.’ Rising oil prices will drive up not only fuel costs but also food, transportation, and production expenses.
If these developments continue, naturally oil prices will rise. Especially the targets chosen by the parties will be a key factor determining future oil price trends. This situation, of course, seriously concerns the Azerbaijani state. A scenario has emerged that is not aligned with our national policy. Overall, though, rising oil prices could allow more foreign currency to flow into our country,” Amirov pointed out.
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