Iran uncertainty causes oil price hike with some negative consequences

Iran uncertainty causes oil price hike with some negative consequences

BAKU, Azerbaijan, Jan. 8

By Leman Zeynalova - Trend:

Rising tensions in the Middle East after Iran had fired more than a dozen missiles at airbases used by the US military in Iraq, typically mean an increase in oil prices, which will benefit oil-exporting countries, Trend reports citing Colin Foreman, Deputy Editor at GlobalData, a leading data and analytics company.

“Oil gross domestic product (GDP) may fare better. The problem is the potential oil price windfall comes with other negative economic consequences,” noted the analyst.

Foreman noted that aside from oil prices, safe haven assets, such as gold and the Japanese yen, have also rose on the recent developments in the Middle East.

“At the same time global stock prices were sent lower on concerns over the growing conflict in the Middle East. While the world waits to see what happens next, the economic impact for the region has already been felt. When stock markets opened on 5 January, the first trading day in the region after the Soleimani assassination, bourses around the region plunged,” noted the expert.

Foreman went on to add that while war may not happen, it is likely that investors will remain spooked long into 2020 and this will be a drag on private sector activity at a time when the region’s non-oil economy is forecast to drive economic growth.

“Over the past five years, regional governments have been working hard to restructure and reform their economies so that they are less dependent on oil and gas and more attractive for private sector investment. Those efforts were expected to produce results in 2020, with the International Monetary Fund (IMF) predicting more rapid growth in key markets such as Saudi Arabia and the United Arab Emirates (UAE).”

Iran’s Islamic Revolutionary Guard Corps (IRGC) used Fateh-313 ballistic missiles in attack on Iraq’s Ayn al-Asad Air Base.

These missiles were fired from Iran’s Kermanshah province (430 kilometers) because of its proximity to the military base.

The missiles have a range of 500 kilometers. Previous reports said that at least 80 US servicemen were killed in an attack on Iraq’s Ayn al-Asad Air Base by the Islamic Revolutionary Guard Corps (IRGC). About 200 people were injured.

Ayn al-Asad Air Base was a strategic spot for the US and delivered support to drones from that base, the IRGC representative said.

Fifteen missiles were fired at 20 sensitive locations, Numerous drones and helicopters were destroyed.

---

Follow the author on Twitter: @Lyaman_Zeyn

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