Iran war threatens long-term impact on energy markets as oil prices rise | US-Israel war over Iran news

While the United States-Israeli war over Iran could leave consumers and businesses worldwide facing higher fuel prices for weeks or months, the conflict, now in its eighth day, could end quickly as suppliers face increased risks to damaged facilities, disrupted logistics and shipping.

The outlook poses a global economic threat and political vulnerability leading to midterm elections for US President Donald Trump, with voters sensitive to energy bills and hostile to foreign entanglements.

Global oil prices have risen more than 25 percent since the start of the war, raising fuel prices for consumers worldwide.

The national average gasoline price reached $3.41 per gallon on Saturday ($0.9 per liter), up $0.43 over the past week, according to the American Automobile Association (AAA). Goldman Sachs has warned that oil prices could rise above $100 per barrel if shipping disruptions persist.

US crude oil settled below $91 per barrel on Friday – its biggest weekly gain on record since data dating back to 1983, suggesting prices could rise.

“The market is shifting from pure geopolitical risk pricing to clear operational disruption as refinery outages and export restrictions begin to undermine crude processing and regional supply flows,” JPMorgan analysts said earlier this week, according to Reuters news agency.

The conflict has already shut down a fifth of global crude and natural gas supplies, as Tehran targets ships in the vital Strait of Hormuz between its shores and Oman and attacks energy infrastructure across the region.

A complete shutdown of the strait would have forced the region’s top oil producers – Saudi Arabia, the United Arab Emirates, Iraq and Kuwait – to halt shipments of 140 million barrels of oil to global refineries – equivalent to about 1.4 days of global demand.

According to the World Bank, more than 80 percent of global trade moves by sea, meaning disruptions in waterways can increase freight costs and delay the delivery of goods.

Accumulations in the Gulf fill

As a result, oil and gas storage at facilities in the Gulf is rapidly filling up, forcing oil fields in Iraq and Kuwait to cut oil output, with the UAE likely to cut next, analysts, traders and sources told Reuters.

“At some point soon, if the ships don’t come then everybody will also shut down,” a source at the region’s state oil company told Reuters, who asked not to be named.

Oil fields forced to shut down across the Middle East as a result of shipping disruptions may take some time to return to normal, said Amir Zaman, head of the Americas commercial team at Rystad Energy.

“The friction can be ended, but it can take days or weeks or months depending on the types of fields, the age of the field, the type of breakdown they have to go through before you get back to the production that you had before,” he said.

Meanwhile, Iranian forces are targeting regional energy infrastructure, including refineries and terminals, forcing them to shut down as well, with some of those operations badly damaged by the attacks and in need of repairs.

Qatar on Wednesday declared force majeure on its massive gas exports after an Iranian drone strike and it could take at least a month to return to normal production levels, sources told Reuters. Qatar supplies 20 percent of global liquefied natural gas (LNG).

Saudi Aramco’s massive Ras Tanura refinery and crude export terminal, meanwhile, remained closed due to the attacks, with no details on damage.

Economists warn that the situation could create a combination of higher prices and slower growth.