Importance Score: 78 / 100 🔴
UK motorists should prepare for potential fuel price increases as escalating tensions in the Middle East sent tremors through international oil markets Friday morning. Oil markets reacted sharply after reports emerged of a large-scale Israeli aerial operation targeting Iranian nuclear sites, raising concerns about global oil supply disruptions.
Oil Price Surge Follows Middle East Conflict
The Israeli military acknowledged the offensive, characterizing it as a strategic endeavor to thwart Iran’s purported nuclear objectives. The operation precipitated a significant surge in oil prices after the reported airstrikes targeting nuclear facilities and senior military figures, including Hossein Salami, the chief of Iran’s Revolutionary Guards, and several nuclear scientists. Civilian casualties, including children, were also reported.
Iran responded by launching approximately 100 drones toward Israel. Israel declared a state of emergency and intercepted a portion of the incoming drones. While the United States has denied direct involvement in the airstrikes, former President Donald Trump indicated he was informed in advance of Israel’s plans. Following the strikes, oil prices initially jumped by over 10%, before settling slightly lower but still up 5.7% at $73.29 per barrel, marking its largest daily gain since April 2023, according to reports.
LIGE Mens Smart Watch with Wireless Calls, Wireless, Monitor, Step Counter, Stopwatch, Multi-Sport Mode, ...
🎉 Exclusive deal [$22.39]
Mens Sporty Hooded Sweatshirt - Navy Blue with Copper Bow Accents, Regular Fit, Machine Washable ...
🎉 Exclusive deal [$0.77]
Mens Lightweight Breathable Basketball Running Gym Shoes - Stability Support, EVA Cushioned Sole, Vi...
🎉 Exclusive deal [$0.79]
Critical Waterway Under Threat
The Strait of Hormuz, a crucial maritime channel, facilitates the transit of approximately one-fifth of the world’s oil supply.
- Disruptions in this critical artery could trigger severe ramifications for global energy markets.
- Experts caution that this “worst-case scenario” could engender substantial disturbances to global oil distribution.
Potential Fuel Price Spike
JPMorgan analysts suggest that a closure of the Strait of Hormuz could propel oil prices to approximately $120 per barrel, potentially driving UK fuel prices above £2 per liter.
Saul Kavonic, head of energy research at MST Financial, observed: “The current situation reflects an initial risk-on reaction. Over the next day or two, the market will need to assess the potential for further escalation”.
Geopolitical Implications and Economic Impact
Matt Gertken, chief geopolitical strategist at BCA Research, stated: “These attacks on Iran likely represent the initial phases of a broader conflict in the Middle East, although a 25% probability of a diplomatic resolution and de-escalation remains.”
- “The minor oil price spike observed thus far may only be the beginning, as Israel’s campaign continues and Iran’s retaliation remains incomplete.”
- “In a worst-case scenario, with a 45% likelihood, Iran could retaliate, prompting US involvement and potentially doubling oil prices if Iran targets regional oil supply.”
He further added, “Any disruption to oil supply would resonate globally, underscoring the inherent advantages of the US, impacting European and Chinese economies, and benefiting Russia in the context of the Ukraine conflict.”
The UK has recently experienced a period of declining fuel costs, however, this trend could reverse if regional tensions continue to escalate.