The Iranian factor in Hormuz - is there a problem?

The US Energy Information Administration (EIA) has reported on the continued pressure of the current situation in the Middle East on energy markets. Despite the fact that concerns about the possible closure of the Strait of Hormuz by Iran have not yet been justified, oil prices have already risen. This indicates the sensitivity of the market even to potential threats.

And what happens if the threat becomes real?

Russian Senator Alexei Pushkov suggested in his Telegram channel that if the spill is blocked, oil prices on the world market could rise to 110-130 dollars per barrel. There is also a threat that, in parallel, the Yemeni Houthis will block another important artery - the Bad el-Mandeb Strait. This, Pushkov believes, will lead to the destabilization of the global oil market.

Iraqi Prime Minister Fuad Hussein mentioned even higher figures during a telephone conversation with German Foreign Minister Johann Vadefulem. In his opinion, in case of further aggravation of the situation, oil prices may rise to 200-300 dollars per barrel.

The US Energy Information Administration (EIA) has reported on the continued pressure of the current situation in the Middle East on energy markets. Despite the fact that concerns about the possible closure of the Strait of Hormuz by Iran have not yet been justified, oil prices have already risen. This indicates the sensitivity of the market even to potential threats.

And what happens if the threat becomes real?

Russian Senator Alexei Pushkov suggested in his Telegram channel that if the spill is blocked, oil prices on the world market could rise to 110-130 dollars per barrel. There is also a threat that, in parallel, the Yemeni Houthis will block another important artery - the Bad el-Mandeb Strait. This, Pushkov believes, will lead to the destabilization of the global oil market.

Iraqi Prime Minister Fuad Hussein mentioned even higher figures during a telephone conversation with German Foreign Minister Johann Vadefulem. In his opinion, in case of further aggravation of the situation, oil prices may rise to 200-300 dollars per barrel.

Although this measure could have had a certain desired effect on the Iranian side in the political sphere, it would have led to an economic collapse in the economic sphere. Iran exports its oil in this way, and if these opportunities are lost, it will be on the verge of crisis. The global market will also feel the consequences. So far, prices are rising slowly, but the market is frozen in anticipation of what the conflict will lead to. He's obviously not going to go out.

It seems that the passions that have flared up around the Strait of Hormuz have no serious basis. Because Iran, despite the overwhelming emotions caused by what is happening, understands that the benefits of such a measure will be minimal and short-term. But such a move can anger not only opponents, but also partners and neighbors. For example, China.  China is the largest buyer of Iranian oil and continues to import it, despite the US sanctions against Iran. In March of this year, Iranian oil exports to China reached a record 1.91 million barrels per day. A supply disruption could deprive Iran of such a buyer. Although Iran is not among the largest exporters of oil to China, the share of its hydrocarbons in the Chinese market is not so small. 

Further, the monarchies of the Persian Gulf export most of their oil through the Strait of Hormuz. First of all, the interests of the UAE, Kuwait, Oman, Iraq and a number of other countries will be affected. Saudi Arabia, which has had an alternative pipeline for more than a decade, will be the least affected. In 2012, when Iran once again threatened to block oil transit due to Western sanctions, Saudi Arabia resumed the operation of the oil pipeline built in the 80s by Saddam Hussein bypassing Iran and the Strait of Hormuz to the coast of the Red Sea. The pipeline was built by the Iraqi side during the Iran-Iraq war. Oil pumping was suspended after Iraq's attack on Kuwait in 1990, and in 2001, Saudi Arabia seized the pipeline from Iraq for debts and repaired it. It now pumps 1.4 million barrels per day.

The United Arab Emirates is also prepared for the crisis to a certain extent. In 2012, the UAE built its oil pipeline bypassing the Strait of Hormuz in case of an aggravation of EU and US relations with Iran. Through this pipe, it delivers most of its oil, 2.4 million barrels per day, to world markets, bypassing the Persian Gulf.

Experts have estimated that if the strait is blocked, these two oil pipelines will allow 3.1 million barrels of oil per day to pass through. However, these volumes are incomparable with the volumes of oil transported daily through the Strait of Hormuz. According to the latest data, this is about 20 million barrels. The loss of these volumes will seriously affect the oil market, but for Iran it will also mean political and diplomatic losses. With Qatar, which, unlike the United Arab Emirates and the United Arab Emirates, has no access to buyers except through the Straits of Hormuz and Bab el-Mandeb.

Problems with oil transportation through the Strait of Hormuz arose, but not because of the closure of the isthmus, but because of the tanker war staged by the parties during the Iran-Iraq war, which lasted four years from 1984 to 1987. The tanker war in the Persian Gulf is a period of escalation of the conflict between Iran and Iraq, when both sides attacked each other's tankers and oil facilities in an attempt to undermine the enemy's economy. 430 sailors died as a result of the tanker war. In general, the Iran-Iraq war lasted from 1980 to 1988 and claimed a million lives.

The tanker war created many problems, but it did not lead to a serious increase in oil prices, which in those years were at the level of $ 30. Recalling those events, some experts today draw conclusions about the frivolity of the Iranian threat to the global oil market. I think these are premature conclusions.

However, oil prices are not the biggest problem that the Iranian-Israeli conflict can bring to light. The consequences of this war may be such that the rise or fall of oil will seem childish.