The Oil Price…if the Middle East Explodes
We preface by saying that this is still a “what if” scenario…
In the unlikely event that a limited strike on the Syrian government’s ability to launch nerve gas on its population through air strikes, rocket attacks or artillery shells has no other effect on the religious war, then we doubt that the impact of such a strike will send shock waves throughout the Middle East.
But, such a strike would weaken the government’s heavy weapons capacities, and so even the battlefield for the Sunni rebels against the Shi’ite government and increase the ferocity and sectarian nature of the war. At some point (as with that first gunshot that started the First World War) sectarian ferocity would infect other nations and bring new destructive tactics to the war on a regional basis.
Questions that then need to be asked are:
Would Shi’ites turn on the oilfields in their area, such as in Saudi Arabia and other West Persian Gulf States and damage production? That alone would send the oil price over $150 or higher as supplies became interrupted and vulnerable. The speed with which Kuwaiti oilfields were repaired gives us a time perspective on how long successful repairs to interrupted oil fields would take. But that would not remove the Shi’ite workers from those regions. The implications are that Saudi as well as U.S. [?] troops would be used to guard those fields, quickly.
Would Iran be emboldened to interfere with the oil passing through the Straits of Hormuz? This seems unlikely for while it is the jugular of Middle Eastern oil, the U.S. has placed its navy so as to prevent that from happening. Nevertheless threats of such action would warrant nations stocking up their oil supplies, taking prices even higher.
Because of the ongoing risks, would global financial markets keep oil prices high until the conflict were over? We think that prices over $150+ a barrel, would deeply impact global economic growth and inflation, affecting nearly all people on earth. This alone would be a game-changer for all financial markets.
….much more analysis & Charts HERE