How can regime change in Iran affect global oil prices

Senior Israeli officials said this week that their military campaign against Iran could lead to the fall of the regime, an event that will have huge implications for the global oil market.

The oil market reaction was significantly, as Israel bombed the third largest product in OPEC for eight consecutive days, with no clear sign that the conflict would end any time soon.

Oil prices have risen about 10 % since Israel launched its attack on Iran a week ago, but with the oil supplies unbearable so far, both American crude oil and the global standard Brent are still less than $ 80 a barrel.

Increased risk

However, the risk of disrupting the supply, which leads to a significant increase in prices, increases as the conflict is long, according to energy analysts.

President Donald Trump threatened the life of the supreme leader of Iran, Ayatollah Ali Khamenei, and considers to helping Israel destroy the nuclear program of the Islamic Republic. Analysts said that Iran’s leadership is likely to target regional oil facilities if it feels at stake.

Scott Model, CEO of Rapidan Energy Group, said the primary goal of Israel is to deteriorate the Iranian nuclear program. Modile said that Jerusalem seems to have a secondary goal to damage the Iranian security establishment to the extent that the local opposition in the country could rise against the regime.

“They do not call his regime to change from abroad, and they call him changing his regime from the inside,” said a model, a former CIA officer and Iranian expert who served in the Middle East.

Official deprivation

Prime Minister Benjamin Netanyahu denies that changing the regime is the official goal of Israel, as he told a public broadcaster on Thursday that local government is an internal Iranian decision. But the Prime Minister emphasized a raw system that may occur as a result of the conflict.

On Friday, Israel Defense Minister Katz ordered the Israeli army to intensify strikes against Iran with the aim of “destabilizing the regime” by attacking “the foundations of its power.” According to what was reported, Israel sought to kill my crude in the opening days of its campaignBut Trump caused the plan.

Model said there are no signs that the regime in Iran is about to collapse.

But more destabilizing political stability in Iran “could lead to a significant increase in oil prices over long periods,” said Natasha Kiniva, head of global commodity research at JPMorgan, in a memorandum of customers this week.

There have been eight cases to change the system in the main oil -producing countries since 1979, according to JPMorgan. Oil prices increased by 76 % on average at their peak in the wake of these changes, before declining to stabilize at a higher price by about 30 % compared to pre -crisis levels, according to the bank.

For example, oil prices have multiplied almost three times from mid -1979 to mid -1980 after the Iranian revolution created the Shah and brought the Islamic Republic to power, according to JPMorgan. This led to a global economic recession.

Recently, the revolution in Libya, which overthrew the oil prices from Muammar Gaddafi from $ 93 a barrel in January 2011 to $ 130 a barrel by April of that year, according to JPMorgan. The high prices coincided with the European debt crisis and almost caused a global recession, according to the bank.

Larger than Libya

Modile said that changing the regime in Iran will have a much greater impact on the global oil market than the 2011 revolution in Libya because Iran is a much larger product.

Model said: “We will need to see some strong indicators that the state is stopping, and that changing the system has started to seem real before the market begins in prices at three million barrels per day a day.”

If the regime in Iran believes it is facing an existential crisis, it can use its stored short -range missiles to target energy facilities in the region and oil holders in the Persian Gulf, said Helema Coft, the head of the global commodity strategy at RBC Capital Markets.

Croft said Tehran could also try to extract the hormonal strait, which is the narrow body of water between Iran and Oman, through which about 20 % of the world’s oil flows.

“We are getting reports that Iran is highly encouraging ships’ respondents,” CNBC’s CNBC’s CNBC’s said.Fast moneyOn Wednesday. Qatar and the Greek Shipping Ministry have already warned their ships against avoiding the strait as possible, Croft said.

“This is not quiet water, although we did not face missiles flying in the strait,” she said.

Greater

Rapidan sees 70 % chance of the United States that will join Israeli air strikes against Iranian nuclear facilities. Modile said that oil prices are likely to gather 4 dollars to $ 6 a barrel if the Iranian facility in Iran in Iran in Fordo was struck. He said that Iran would likely respond in a limited way to ensure that the regime remains.

But there is also a threat of 30 % of Iran that disrupts energy supplies through revenge on the infrastructure in the Gulf or ships in the Strait of Hormuz, according to Rabidan. Oil prices can rise from $ 100 a barrel if Iran is completely mobilized to disable shipping in the strait, according to the company.

“They can be disrupted, from our point of view, charging via hormonal for a long longer than the market believes,” said Bob Bob McKinani, the founder of Rabidan and former Energy Adviser to President George W. Bush.

McNali said that shipping could be cut off for weeks or months, instead of the oil market point of view The Fifth US FleetAnd its headquarters in Bahrain, will resolve the situation in hours or days.

“The corridor will not be,” he said.