Prospects for a shock increase in oil prices

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to Lenta.ru about the current impact of the Iran-Israel conflict on the global oil market.

The war between Israel and Iran in the Middle East is unlikely to be protracted and will not significantly affect global oil prices. A further escalation of the conflict, the expert admitted, could lead to Iran blocking the Strait of Hormuz, through which more than a fifth of the global commodity trade passes. With a prolonged closure, oil prices may rise to $100 per barrel or higher.

However, blocking the strait is primarily unprofitable for Iran itself, whose energy sector is heavily dependent on oil sales along this route, Gromov noted. A decrease in revenues to the state treasury can undermine the socio-economic situation in the country.

"Then Iran itself will become the first victim of such a development," he concluded.

Gromov sees its gradual extinction as the most likely scenario for the end of the conflict in the Middle East. In this scenario, the Israeli authorities will declare that they have fulfilled all their political tasks, and the Iranian leadership will declare that it has responded to aggression and retaliated. In the foreseeable future, the global market will get used to the "relatively constant" tension in the region and will not face a shock increase in commodity prices.

"The scenario of an oil apocalypse will not happen, because Iran itself does not want it," the expert concluded.