Oil prices rose by a staggering 21% over the last three months. Markets anticipated that President Trump was going to dump the Iran nuclear deal. He did just that earlier this week and Mideast tensions are already starting to boil over. That means oil prices to surge further as the oil-rich Mideast descends into chaos.
The US Treasury will now slap on debilitating economic sanctions that are likely to gut Iranian oil production. The last time the US sanctioned Iran, oil production fell by a hefty million barrels per day. Iranian oil production will fall by a similar amount this time, maybe even more if President Trump ratchets up the pressure.
This supply crunch is hitting an already tight market. Accordingly, oil prices could surge even further as more details come out. Indeed, a hefty 34.5% of global oil production is now at stakes as the …
Oil-rich Mideast descends into chaos
Iran may feel it no longer has anything to lose. Accordingly, it can ratchet up attacks on its regional foes — Saudi Arabia and Israel. And we’re seeing early signs of this already.
Iranian fighters are now entrenched in Syria. Israel sees this as a threat to its security and has been targeting Iranian forces with missile attacks. Until recently, the Iranians have not returned fire directly on Israel. That is until yesterday.
Shortly after Trump killed the Iran deal, the Iranian military responded with rocket attacks on the Israeli occupied Golan Heights. Despite the bellicose words between the two rivals, this is the first time that Iran has directly attacked Israel with its own military.
The Israeli Defense Force (IDF) responded promptly by bombing Iranian weapons depots, logistics sites, and intelligence centers in Syria.
Further south, Iranian backed Houthi fighters in Yemen launched missiles at the Saudi capital Riyadh. The missiles were intercepted this time. However, Saudi Arabia will almost certainly escalate its bloody war in Yemen.
Moreover, Israel and Saudi Arabia may now attack Iran directly. The Mideast’s two biggest oil producers getting into a shooting war with each other will put tremendous pressure under prices. That’s bad news for the consumers and the broader economy.